Special Report: Is Your Card Next?

Updated: 02/25/2014 11:11 PM
Created: 02/25/2014 10:56 PM
By: Darren Danielson

The initial panic of the Target data breach has diminished, but experts are warning, don't let your guard down.  Cyber crooks are continuing to find new and creative ways to get your credit and debit card information.  And once they get it, they also know what to do with it.

"It's usually organized crime that's behind stealing this information," says Bob Cedergren. Cedergren leads the national financial forensic practice for the WIPFLi accounting firm, but he lives here, in Duluth. 

"They sell it on the open market and that allows access into people's accounts."  

Cedergren says it's like they steal a virtual key from your purse or your wallet, which lets them into your credit or debit card accounts. And it's big money, very big.

Identity theft is a $50-billion dollar a year industry.  

The magnetic stripe on the back of credit and debit cards typically contains the account number, the name of the consumer, and the expiration date of the card.  

"It's a relatively small amount of information, but it's critical information," says Mark Lanterman.  And he should know, he advises credit card companies for a living.

Lanterman says if a criminal gets ahold of that information, they can transfer it to another card and simply go shopping.  

They keep whatever they buy, but the bill goes to the person whose information is on the magnetic stripe.

Target officials told a senate finance panel that hackers gained access to their computers by going through a vendor firm, another company that does business with Target.

Experts appear to be in near-universal agreement that all companies should be on high alert.

"There are two types of financial institutions, the ones that have already lost money due to the credit breach and those who will," says Dr. Rick Revoir, who teaches finance at the College of St. Scholastica.

Bob Cedergren agrees, saying, "I don't think it's going away, in fact, I'm convinced it's going to just continue to be a bigger issue."

Both Cedergren and Dr. Revoir told us the magnetic stripe cards we use in the United States are years behind other countries technologically.  

"Europe is probably a decade ahead of us. In fact, the technology was developed in 2002 and is widely used just about everywhere except in the United States," according to Cedergren. 

Dr. Revoir adds, "In Europe, they widely use the chip and PIN technology.  It's unclear if that technology would have prevented the breaches that we've seen over the last few months, but it significantly cuts down on fraud." 

Cedergren told us even countries like Kenya and some of the lesser-developed countries are using chip and PIN technology.  

He puts it simply: "we need to catch up."  

The cards look the same on the outside, but they are very different on the inside.  Instead of a magnetic stripe, the European cards have an actual computer chip embedded inside.  

You slide the card through a computer chip scanner and enter your PIN, a number only you know.  That's how it gets it's name, chip and PIN.  

"Chip and PIN is by far much more secure", says Cedergren.  "We know the PIN number, nobody else needs to know the pin number, and signatures don't even get looked at anymore when you sign things." 

Only a small number of banks in the U.S. have issued cards with chips in them and retailers from gas stations to grocery stores also have to buy new chip card reading machines.  

Until they do, the new cards can't really be widely used.    

Dr. Revoir says it will be an expensive transition.  

"There's a cost. Think of all the card scanners, every gift shop you go into, every restaurant, every retailer, they need new machines.  There will be a significant cost for all the retailers to upgrade." 

Small steps are being taken.  

Sen. Amy Klobuchar (D-Minn.) is pushing for tougher laws on cyber criminals.  Both she and Sen. Al Franken (D-Minn.) are leading the charge for faster nationwide implementation of the new technology.    

"If anything, we've learned from this major, major breach that we can no longer do nothing and that we have to take action," Klobuchar recently told a senate subcommittee.

At the same hearing, Sen. Franken added: "The U.S. has 1/4th of the world's card transactions and yet we are victims to half of all card fraud."  

Until chip and PIN, or some other technology, is widely adopted in the U.S. our magnetic stripe cards are leaving us all vulnerable.  

Experts advise:

  • Pay close attention to your accounts. watch for suspicious transactions.
  • Use debit cards at ATMs, but use credit cards for purchases. Consumers own less liability using credit cards.   
  • Set up electronic alerts so you get a text or email whenever a transaction takes place.
  • There are three credit reporting agencies and each are required to give consumers one free credit report per year. Our experts recommend staggering them. Request one from each agency every four months to cover a whole year.  
  • Never use a debit card for online transactions and keep debit cards in your possession at all times. 
  • If you ever cancel a card that you make automatic payments with, don't forget to notify companies of your new card information.
  • And finally, be patient. The industry doesn't expect to fully transition from magnetic striped cards in the U.S. until 2020.

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