American Express to begin issuing more secure credit cards

Later this year, one of the nation's top credit card issuers and lenders will join its three other major competitors in issuing plastic that comes embedded with chip and pin technology.

American Express will soon begin sending out credit cards that come with EMV chips embedded in them, and has created a deadline by which retailers accepting its cards must be set up to handle this relatively new purchase type, according to a report from American Banker. EMV technology (which stands for Europay, MasterCard, and Visa, the companies that co-created the payment type) uses a small microchip embedded in a credit card to complete transactions instead of the magnetic strip that has been ubiquitous on nearly all accounts issued in the U.S. since the 1950s.

American Express will begin issuing EMV credit cards in the U.S. at some point in the second half of the year, the report said. Already, it claims to handle millions of these transactions worldwide every year.

This type of technology has become the norm in most major countries around the world, including nearly all of Europe, Southeast Asia and Central America. The U.S. is the only large country in the world not to have EMV technology readily available to credit card customers. Americans who travel abroad now often discover that they will have difficulty finding many merchants who are capable of accepting traditional U.S.-issued credit cards. To that end, some lenders have begun issuing cards capable of both magnetic strip and EMV transactions to a small number of their more affluent customers, typically those who travel abroad regularly.

American Express was the fourth and final major issuer in the U.S. to put an EMV requirement in place, the report said. Its roadmap to establishing EMV ubiquity in the U.S. is very much like to those laid out by the other three issuers who had previously announced similar plans: It dictates that all retailers have terminals capable of handling EMV purchases by October, 2015, a date in close proximity the one established by Visa with a similar decree last August. Fuel merchants will be granted an additional two years to become compliant.

It will penalize those who are not compliant with this mandate by shifting the responsibility for any fraud to the party in its payment hierarchy that has the least secure technology, the report said. This means that if a merchant is set up to support chip and pin, but a payment processor is not, the liability falls on the latter.

However, all four major issuers are mandating that payment processors themselves be set up to handle this type of transaction by April, 2013, the report said. And American Express will incentivize adopting the new systems for merchants by relaxing requirements for reporting Payment Card Industry Data Security Standard compliance for those who have EMV capabilities at the point of sale terminals where they process 75 percent or more of their transactions.

Reason for the change to new technology
Put simply, the benefit for all companies involved in the credit card accepting process is that EMV technology is more secure than traditional credit card use because of the way in which the embedded microchip protects payment data, the report said. By mandating a switch to the new technology, all four of the nation's top card issuers are essentially helping to make credit card transactions more resistant to fraud. Further, American Express, which tends to have a more affluent customer base than other issuers, has also seen an uptick in demand for these cards in recent months.

"The payments industry is continuing to evolve rapidly, and American Express recognizes the growing demand for chip-based contact and contactless payments in the U.S.," said Suzan Kereere, senior vice president and general manager, American Express Global Network Business. "We also fully recognize the complexities involved in migrating to EMV chip-based technology, and our first priority is to provide choice and flexibility for merchants and our card-issuing partners so they can adopt the EMV solution that best meets their needs. As a global payments network, we understand the benefits associated with EMV-based technology, and we are committed to continue enhancing security at the point-of-sale for both merchants and American Express Cardmembers."

But better credit card technology is not the only way in which consumers can better protect their finances. They should also consider taking the time to order copies of their credit reports, as this will help them to identify any potentially unfair markings that may be having negative effects on their credit standings. Fortunately for these borrowers, working with a credit repair law firm may assist in clearing up these erroneous entries and help to get their credit back on the right track.