Visa and MasterCard to Phase Out Swipe-and-Sign Cards

In an effort to help protect consumers' credit card information, several credit card companies will be doing away with swipe-and-sign cards by October 2015.

Easy and non-secure process
Paying for items with a standard credit card is simple as swiping a card through a machine and jotting down a signature. This process is quick, but it can leave consumers susceptible to data breaches from cyber criminals.

For swipe-and-sign cards, consumers' personal and credit information – like their name, bank information and account balance – is contained in the magnetic strip on the back. Cyber criminals have developed technology to access this information by using skimming machines to hack this information.

To combat this threat, several credit companies will be issuing chip-and-PIN cards to their customers. With these types of cards, consumers' information will be contained in a microchip and transactions will require a pin number to be processed. This, in turn, will protect each consumer's credit details and credit score. Visa and MasterCard announced that they will be switching over to this new model by October 2015, according to The Wall Street Journal.

PIN cards have been considered
The discussion of using PIN cards has been talked about for years, as the U.S. is one of the last major markets to not employ the technology, according to the Journal. The decision to go with this new model has become more prevalent within the past few months.

In December, a data breach at Target stores affected more than 70 million shoppers credit and debit information was stolen. The Secret Service cyber crime division has apprehended more than 4,900 suspects that were involved in some sort of online fraud over the past four years, according to United Press International. These suspects are reported to have stolen upwards of $1.37 billion in consumer funds over the past few years.

Lawmakers are very aware of the problem and are doing their best to stop it. At a Senate hearing on Feb. 4, Richard Blumenthal (D-Conn.) said half of the fraud in the world occurs in the U.S. Sen. Dianne Feinstein (D-Calif.), who has been trying to pass a form of data legislation since 2003, said consumers should be aware of data breaches the second they happen.

"If someone has an account and their data has been breached, they should be notified," Feinstein said. "The public notification is really vague and then you find out in other brutal ways if you have money missing."

New cards could protect credit scores
These new PIN cards could pay dividends in protecting credit card holders personal information and credit scores. If a consumer's information is hacked or compromised, a cyber criminal could access their bank accounts or open a new line of credit. This can be detrimental to one's credit score because if thieves open new accounts, it could raise the consumer's credit utilization ratio, which is an important component in devising a credit score.