10/9/2012 3:43 PM ET|
4 ways credit cards are changing
Your plastic will soon look and feel different. It's mostly a result of changing technologies but also because card issuers want to stand out.
The way we pay with plastic has changed a lot over the years, from the explosion in debit card use to the proliferation of rewards cards from retail stores, airlines and hotel chains. But the physical features of cards have evolved more slowly. Here are some of the ways that the look and feel of your card may have changed over the past few years, and how it will continue to change in the near future:
No more raised numbers?
Seeing credit cards with embossed characters -- those raised numbers and letters on the front of the card -- brings to mind the old days, when credit card transactions were carried out with "knuckle buster" devices that took a physical imprint of the card. They also served a security function by making cards harder to duplicate.
"At the time, an embossing machine was pretty expensive for crooks to get their hands on," says Raul Vargas of Identity Theft 911.
Now both functions seems somewhat archaic -- it's easier for identity thieves to replicate the embossing, and most transactions are carried out by swiping the magnetic strip. As such, both Visa and MasterCard now offer customers flat cards without the 3-D lettering.
One advantageof unembossed cards is that your local bank can make one on the spot, allowing you to walk out with a new credit card.
"There has been a move to put instant issuance of the card into the branch," explains David Robertson, the publisher of consumer payment journal the Nilson Report. "It's there that you're seeing cards issued with less levels of personalization than are available to the bureau mailing the card."
Unembossed cards are far from becoming the standard, in part because many merchants still rely on old-fashioned carbon-copy devices as a backup; Robertson says that hundreds of thousands of the devices are still sold every year. But don't be surprised if the next card you get is smooth.
Magnetic strips replaced carbon-copying a long time ago, but even they aren't the most up-to-date way of paying with a credit card. So-called smart cards use embedded chips instead of magnetic strips to make payments; depending on the technology, the chip may require you to insert the card into a slot or simply wave it at a special terminal. The terminals can be found many places, including gas stations and New York City cabs, and issuers offer a variety of contactless cards (like MasterCard's PayPass line). Still, such cards are by no means common here, as adoption of chipped cards (and the terminals that accept them) has been relatively slow in the United States compared with Europe, where smart cards are the standard.
But that's going to change in the next decade.
"(The issuers) have all committed to chipped cards," says Robertson. "It's a multi-step process, and the first step will involve the merchants' side, with banks sending out directives to the merchant community."
The first deadline is just a year away, he says, estimating thatuse will be widespread by 2015.
Even then, don't expect to see magnetic stripes disappear. Even those ahead-of-the-curve Americans who currently use smart cards generally have "hybrid" cards with both chips and magnetic stripes, so that they can be used at either kind of terminal. That's likely to continue for the foreseeable future.
"There will be some merchants who deploy terminals by the deadline, but it's overwhelmingly likely that most will not meet the deadline," says Robertson. "This is not a situation where someone snaps their finger and it all gets done."
Evolving security features
Embossed numbers are among the few physical security features card makers have implemented that have stood the test of time.
"They updated the signature panel, so it's not just a blank sticker," recalls Vargas, explaining that the background of the panel would be layered with a background pattern of the words "Visa" or "MasterCard," for instance. A similar approach was taken with the logo itself, which on closer inspection was revealed to be made up of tiny letter Vs (in the case of Visa cards). And then there were the holograms embedded in the front of the card, which were likewise difficult to copy. But all three have seemingly fallen out of favor.
"They used holograms because they're hard to replicate, but I don't think many issuers use holograms anymore," says Vargas, who says the same holds true for the special logos designed from tiny letters. Meanwhile, the patterned background of the signature panel appears only on some cards these days. It seems that as crooks became more sophisticated, it stopped being worth the trouble for banks to load their cards up with "fraud-proof" design features.
"U.S. banks care about cost versus rewards," says Vargas. "Twenty years ago the hologram stopped fraud, but now that the crooks have the technology to reproduce that, it's no longer worth it."
So which security features remain? There is the CVV (card verification value) code, the three-digit numerical string on the back of the card intended for card-not-present transactions. And if you have a smart card -- especially one without a magnetic strip -- it will be difficult for a thief to steal the payment data off it (whether or not you wrap it in tin foil). And the hologram is evolving, too -- in 2005, for instance, MasterCard introduced cards that embed holograms directly into the magnetic strip.
If doing away with embossed lettering doesn't make your card sleek and stylish, why not take the next step and just do away with numbers and lettering altogether? That's what Discover did with its Discover IT card, which sports only the logo on the front of the card, with the other information moved to the back. And lest you think that a card that lacks the cardholder's name on the front is less secure, note that the Discover IT card comes with a patterned signature field, a hologram-embedded magnetic strip and $0 liability on fraudulent purchases. And the rewards aren't bad, either.
Other issuers have gone in the opposite direction, adorning the card with bells and whistles in an attempt to separate themselves from the pack. Take the Citi G2, a rewards card that Citibank began testing back in 2010. The card comes with two tiny buttons. One is used for regular credit card transactions; the other allows you to pay for purchases with any rewards you've accumulated. A tiny light indicates which mode you're in.
Finally, some credit card issuers have experimented with different materials for their cards. The American Express Centurion card, for instance, is made of anodized titanium, while the JPMorgan Palladium card is made of palladium and gold. These and other non-plastic credit cards are generally geared toward an exclusive, high-income crowd, so chances are you won't get to pull one out of your pocket. Still, it's a good example of how issuers are using unique design choices to differentiate their cards from the competition.
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