Chip and pin with everything

By Sarah Modlock

31 January 2006

From 15 February any customer with a chip and PIN card must use their PIN to be sure they can pay with their card.

Picture the scene... a romantic candlelit restaurant, fabulous food and wine. A couple gaze into each others eyes, consumed with lust, er, I mean love. He - or perhaps she - leans forward to whisper the alluring words 'I'm sorry darling, I don't know the PIN for my credit card - could you pay please?'

When St Valentine's Day arrives in a fortnight, it will herald a metaphorical cold shower for anyone who is still struggling to remember the PIN (Personal Identification Number) for their chip and PIN credit or debit card. In fact, St Valentine's night is the last time you can sign a payment slip if you are using a chip and PIN card. From 15 February any customer with a chip and PIN card must use their PIN to be sure they can pay with their card in retailers that have upgraded to the new system. After that, if you don't use your PIN, the card may be declined and the option of signing can no longer be guaranteed.

Chip and PIN is a more secure way to pay with credit or debit cards in the UK. Instead of using your signature to verify payments, you need to enter a four-digit PIN known only to you. Your credit card looks no different but a small microchip is embedded which holds the same personal data as the magnetic stripe (e.g. cardholder name, card number and expiry date) but also adds a range of indicators and counters which reduce the opportunities for fraud.

Although most cards have been re-issued with the new technology, there are still some cards which have not yet been upgraded to chip and PIN and if you have one of these then you will continue to sign. You can tell if you already have one of the new cards by looking for a silver or gold coloured square on the front left-hand side of the card. But if you are unsure about what kind of card you have you can contact your card company.

So why is all this happening? The fact is that credit and debit card fraud is a big issue. It has increased by more than 30% a year in the UK. Figures from payments association Apacs show that total card fraud reached nearly £505 million in 2004 with an incidence of card fraud taking place on average every 8 seconds affecting one in three people. PIN numbers are much more secure than a signature and finding out the PIN number of a particular card is also much harder than copying a signature. Chip security systems are reviewed and updated regularly and the UK card industry maintains a multi-layered approach to security so that it is not reliant on any single system. Already, chip and PIN has seen lost and stolen card fraud and counterfeiting reduce by a third.

It's worth remembering though, that cards are always safer than cash. The chances of you becoming a victim of card fraud are still low (fraudulent transactions make up 0.141% of all transactions). If you are unlucky enough to be a victim you will not suffer any financial loss as a consequence providing you have not acted fraudulently or without reasonable care.

PIN not pen

Most point of sale keypads will have small shields to protect your PIN from prying eyes. But you will need to be cautious about entering it - make sure no one is looking over your shoulder. It's important to note that your PIN will never be needed for mail order, telephone, or internet purchases and you should never reveal your PIN in any circumstances.

'Chip and pin has helped reduce credit card fraud and it is vital this initiative is not hindered by consumers who cannot remember their pin,' says moneysupermarket's Richard Mason. 'Beware, attempting to remember your pin by inputting incorrect numbers could mean you risk your pin being locked. We would advise anyone who does not know their pin to contact their card provider today or change their pin at a cash machine to one that is easy for them to remember,' he adds.

There will still be some instances where cardholders will continue to sign even after 14 February 2006. These include:

•  purchases in outlets which are not yet using chip and PIN technology, such as John Lewis and Waitrose.

•  purchases made on cards which have not yet been upgraded to chip and PIN - expect to get sent a chip card replacement at some stage.

•  purchases made abroad in countries which have not yet upgraded to chip and PIN.

Some elderly, visually impaired or disabled customers may prefer to use a chip and signature card instead of a chip and PIN card. They should contact their card issuer if they have not already done so, to request an alternative type of card.

Pretty soon, any remaining avenues for thieves and fraudsters will be cut off. Expect the way you pay for goods by credit card over the internet and by telephone to be see technological anti-fraud advances. Apacs is working with the banks to develop a standard for chip-and-pin card readers that generate one-off security codes. You slide your card into the reader, tap in your number, get your code, then enter it online.

This should make online shopping safer but unfortunately these card readers are unlikely to reach us before the end of 2006 at the earliest. In the meantime, you can best protect yourself by always looking after your cards and card details, checking your statement to ensure you have not been a victim, disposing of receipts with care and NEVER disclosing your PIN even if somebody claims to be from your bank or the police.

And in addition to remembering the slushy card and the restaurant reservation this St Valentine's Day, make sure you get up-close and personal with your PIN.