Banks in the U.S. have been reluctant to invest the money needed to upgrade and update their credit card technology infrastructure. Thats not surprising, since they have been tightening their purse strings in many ways over the past few years. One unfortunate consequence of the banks foot-dragging is that identity theft against holders of traditional credit cards has become a whole lot easier.
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The Function of Magnetic Stripes
The black strip across the back of your credit card is comprised of tiny magnetic particles, not unlike those found on old cassette tapes. But instead of recording music, the credit card strip records personal and financial information that identifies you and your unique credit card account.
When you slide your card through a merchants credit card device, that data is read and communicated so that the card transaction can be approved. But modern technology has made it easier for hackers, using similar high-tech gadgets, to intercept that data.
How Credit Card Thieves Operate
Criminals exploit the weaknesses of conventional magnetic strip credit cards, which many experts say are obsolete and inadequate in a variety of ways. Some use wireless devices that can read some credit cards from a distance. Thieves are even able to read cards being carried in someones pocketbook. The data is stolen and transmitted over invisible radio waves; the victim doesnt find out until later.
Many hackers prefer to use thin devices called skimmers
that can read card stripes. Theyll break into equipment like ATM machines or gas station pumps, and attach one of these skimmers. Then, the skimmer quietly collects card data every time a customer inserts her plastic. The thief returns later, removes the skimmer, and downloads all the confidential financial information it has harvested
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If youve been to Europe lately and discovered, to your chagrin, that your credit card didnt work, its because Europeans adopted the more advanced chip and pin system years ago. Those cards have computer chips embedded in them, and are harder to hack. They also require a four-digit personal number that the card user punches in to complete the transaction.
American banks and other card-issuing companies are finally getting on the anti-hacking bandwagon. A small number of chip and pin cards are already available in the U.S. and, by 2013, their use should be widespread. Contact your bank or card company, and request that they issue you a new card as soon as the chip and pin technology becomes available.
Meanwhile, if you encounter a card slot in an ATM or gas pump that seems wiggly and loose, dont use it. Report it to local law enforcement, because it may contain a skimmer. You can also invest in a special credit-card wallet that blocks radio waves. That helps thwart thieves using those surreptitious wireless card readers.