Page last updated at 10:57 GMT, Tuesday, 14 February 2006

Q&A: Chip and pin

Over the past two years card issuers have been replacing credit and debit cards in the UK with ones that include an embedded chip.

From Wednesday retailers may refuse to accept a chip and pin card if the cardholder does not know his or her pin (personal identification number).

What are chip and pin cards?

These debit and credit cards contain a microchip which is used to store data on the card.

Those with the cards also verify a purchase by using a four-digit number, known as a personal identification number (pin), rather than signing a receipt.

My mother has not been issued with a chip and pin card what should she do?

People who have not been given a new card can continue to sign receipts as before.

A recent survey by card issuer Retail Decisions suggested that at least four out of 10 consumers still had at least one non-chip and pin card in their purse or wallet.

Most of the major UK High Street banks have virtually completed their chip and pin roll-out but issuers such as American Express and Morgan Stanley have been a little slower to act.

When will she get her chip and pin card?

This will depend on the individual plans of the card companies and building societies.

In most cases a chip and pin card will be issued when a current card reaches its expiry date.

But some issuers have been busy replacing cards before their expiry date, in a bid to complete chip and pin roll-out.

In total, nearly 130m of the 141m credit and debit cards in the UK are chip and pin.

Why have chip and pin cards been introduced?

It is hoped the system will reduce card fraud.

The embedded chip stores information more securely than the old magnetic strips on cards.

MAIN AREAS OF CARD FRAUD
Counterfeit cards 45.6m (down 31%)
Card stolen or lost 44.3m (down 31%)
Card not present 90.6m (up 29%)
Card lost or stolen in the post 22.8m (down 37%)
ID theft on card accounts 16.1m (down 16%)
Source: Apacs (January-June 2005, year-on-year change in brackets)

It helps negate card "skimming".

In addition to the use of chips, the process of verifying a purchase using a pin rather than a signature makes it more difficult for criminals to use lost and stolen cards.

What is skimming?

Skimming is a process whereby the data from a card's magnetic strip is electronically copied onto another card.

This fraud is often carried out in restaurants, shops and petrol stations - you hand over your card and a replica card is produced and used, sometimes on the other side of the world.

In the past, skimming UK cards netted fraudsters more than 100m a year.

But the gradual introduction of chip and pin has seen counterfeit card fraud falling.

Fraudsters will still be able to skim cards but the counterfeit will not have a working chip, this means that it should be rejected by most ATMs and shop tills.

Can I continue to sign for purchases even though I have one of the new cards and what if I forget my pin?

The card issuers and many retailers say no but in reality there is likely to be a little leeway.

During the introductory period of the chip and pin system, if cardholders did not know their pin number, retailers have been able to accept a signature after first checking with the card issuer.

After 14 February, however, banks and chip and pin functioning retailers have decided to curtail this facility.

But some retailers have admitted that they may continue to accept signature on a case-by-case basis.

Anyone who has forgotten their pin can contact their card issuer, who will provide a new one.

Is there an alternative for people who are unable to use chip and pin cards?

Elderly people or those with disabilities preventing them from using a chip and pin card can apply for a chip and signature one instead, under which they continue to sign a receipt for purchases.

The Association of Payment Clearing Services (APACS) has said more than 100,000 chip and signature cards have been issued, but some people with disabilities have reported problems getting them.

Many vulnerable consumers are being told that they will have to use their pins or they will not be able to shop using card payment

The National Consumer Council (NCC) have estimated that up to three million people may have problems remembering or coping with the physical demands of entering their PINs.

Card issuers should do more to make vulnerable consumers aware that they have the option of going for a chip and signature card.

Can chip and pin cards be used abroad?

The cards can be used all over the world.

In countries which operate the chip and pin system customers will be expected to verify purchases using their pin.

In countries that do not use the system people will be expected to sign a receipt to pay for items.

I have heard that some firms have been slow to convert their tills to chip and pin, what will happen to them?

It has been estimated that one in 10 tills have as yet not been converted to chip and pin.

Some big high street names such as Clinton cards are amongst the firms that have not made the changeover.

Customers using non-chip and pin ready tills will be able to continue to sign for purchases as before.

However, under a bank agreement which came into force last year, retailers that have not converted their tills to chip and pin may have to pick up the tab for fraudulent card transactions.



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