new smart credit cardsWhile paying for something with a credit card is the ultimate in convenience -- you swipe, then sign -- it can be a little too easy for crooks who get their hands on your card to go on a spending spree and rack up big charges. In the U.K., a different type of credit card thwarts would-be thieves. Dubbed "chip and PIN," the cards are implanted with a small chip that will only allow the card to work if the user enters the correct PIN number.

This Bankrate.com article says fraud at stores in the U.K. has dropped since chip and PIN cards were adopted widely, but it also points out that enterprising scammers have taken to the Internet, since online shopping gives them a PIN-free loophole. More alarming is the fact that, in the U.K., card issuers hold the cardholders responsible for fraudulent purchases made with a PIN card, claiming that if a thief has a consumer's PIN, it must be because he or she gave them the digits. Finance regulations would prevent this sort of scenario from happening in the United States, says an expert quoted by Bankrate, but it's still not clear how consumers would be impacted by widespread adoption of the cards.

"While there's not a doubt in my mind this would have a significant impact in lowering the amount of fraud transactions, I don't know how fair it is to shift liability onto the consumer's shoulders," John Ulzheimer, president of consumer education for Credit.com, told WalletPop in an interview. Zero fraud liability is a key marketing point for many cards, he points out. "I'm not entirely sure consumers would jump on board" with a card that would make them responsible for another person's fraudulent charges, he says.

As Bankrate points out, credit card companies currently get to take huge tax write-offs on fraudulent charges, so sinking a lot of money into anti-fraud technology might take away an easy source of revenue. And experts say it would have to be a sizable investment to roll chip and PIN cards out across the United States. Each card costs up to 10 times as much to produce as a conventional credit card, and retailers would have to buy all new machines to process the chips embedded in the cards.

Credit.com's Ulzheimer says such an investment could pay off, but the drop in fraud would have to be substantial. "I recognize there's a cost to this stuff, but it seems like we're reducing potentially billions of dollars in fraud," he says, especially since Americans are heavier credit card users than the English, which gives scammers more opportunity to perpetuate fraud.

But even if card issuers were to implement chip and PIN cards in the United States, Ulzheimer points out that high-tech criminals are always right on the heels of the latest innovations designed to stop them. "In five years, the criminals will have this one whipped, too. They'll figure out a way to crack this."

The bottom line? Tech tricks to keep your account safe are good, but a much more reliable way to avoid fraudulent charges is to keep track of your card, and cancel it immediately if it goes missing.

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