Maybe you have one, maybe you know somebody that has one or maybe you’ve never heard of them before; whatever your situation, there is a new type of credit card technology amongst us and it’s something I think we should all be aware of.  It’s called the Emue card and, although a card that disappears when you spend too much money might seem like a good idea, Emue cards are not designed to bury their heads in the sand when you go overdrawn or any such cleverness.  In fact, despite the financial crushing many of us are receiving, the Emue card has little or nothing to do with helping people rebuild poor credit ratings or consolidate debt – as most “new” cards claim to do.

Instead, Emue cards are aimed at reducing credit card fraud – something that is rising during the depression.  Although the introduction of Chip and PIN technology helped reduce credit card crime in shops, the amount of card-not-present fraud (phone, internet and mail order fraud) has actually risen since the introduction of Chip and PIN; now making up over 50% of all credit card fraud, or over £324,000,000 in 2008 alone!  This is not surprising, given how easy it is to commit this kind of fraud; online and phone transactions simply required the buyer to enter the card number, expiry date, start date or issue number and the security code printed on the back of a card.  Obviously anybody in possession of any card can find this information within seconds and the card it to buy anything - irrelevant of whether they are the legal card owner or not.

The idea behind Emu cards is quite simple; they work in general just like normal credit or debit card except that they also require the user to enter a PIN code into the card - like a credit card terminal.  The Emu card, which is a battery-powered microcomputer, then creates and displays a different unique four-digit code every time it is used.  This code is then used during the transaction process, meaning that fraudsters cannot use the Emue card without knowing PIN code required to generate the code!  Trully a new age of credit card technology may have arrived!

Last time we discovered that banks are cutting back on the amount of credit cards they issue and who they issue them to.  We also found out that consumers, especially in the USA, are using their credit cards more for small transactions, but less overall.  This seemed like a good move; small purchases are easier to repay on time and help cut down on the amount of interest and debt that consumers accumulate, allowing them to rebuild shattered credit ratings and continue to use their cards within their means.  However, is this enough to save the credit card industry?

With banks holding back credit and consumers starting to live more within their means, I wonder whether we could already have lived through the Credit Age?  Certainly the economic recession is terrifying to many of us, but I wonder whether this fear won’t just fade away when the dawning light of financial stability reappears – however many years in the future that may be.  For we should not underestimate just how great a change it would be for us to move away from living outside of our means.  The commonplace use of credit cards is not simply something that could disappear overnight; it is a lifestyle for so many that credit card spending is practically part of our cultural identity!  Should we expect this depression to teach us a hard lesson from which we will learn and grow, or should we be realistic and assume that the financial crisis will simply lead to a new system of credit into which we will all gratefully plunge ourselves?

We cannot deny the fact that most of us would rather live outside of our means and pretend that everything is fine when it really isn’t.  Our history of irresponsible borrowing and masses of ever-growing debts are tribute to these facts.  Perhaps the credit crunch will teach us a valuable lesson; maybe it is time for us to put our credit cards down after all…

Chip and PIN is something we have all heard of, but I wonder how many of us really know what it is, how it works and why it is meant to be better than the old method of signing for your purchases.  For your convenience, I shall outline the subject now:
Chip and PIN is the implementation of the EMV (Europay, Mastercard and Visa) standard for secure payments, designed to make transactions more secure and reduce credit card fraud.  It involves embedding tiny microchips into credit and debits cards, which are automatically authentically using a PIN security number.  By inserting the card into a credit card terminal, a customer has to insert the correct PIN number to authenticate the payment.  If a customer does not know their PIN number, the verification fails and the transaction does not go ahead; making the system secure, yet also very swift and simple.
Until it was introduced, all credit and debit card transactions required a signature for verification after the account data was read off the magnetic strip or an imprint was made of the raised text of the card.  The problem with this system was that people could easily steal cards from people and forge a signature, or steal cards from the post, write their own signature on the card and go about using it as if it was their own.  More advanced methods of card fraud involved technology that was used to clone cards by reading the magnetic data from one magnetic slip and writing it to another.  With the new system, another person may have your card but, without also knowing the correct PIN number, they cannot use it for face-to-face sales.  At the same time, these PIN numbers are entered in very public spaces, where somebody could easily observe and remember them.  All it would then take would be for the same person to steal the relevant card and cashiers have no reason to suspect them for using it.  Even so, it would seem harder for another person to get hold of both your card and secret PIN number than to steal your card and forge your signature.
Despite the growing popularity of the Chip and PIN system – over 1.1 million machines in the UK are Chip and PIN compatible – many small businesses are reluctant to upgrade, due to the cost of purchasing a new credit card terminal, or point of sale system.  Nevertheless, all major banks now issue cards featuring both magnetic strips and chips.  Cashiers can still instigation PIN Bypasses, allowing customers to sign for their purchases if they forget their PIN number, however this is strongly discouraged and card issuers and banks can choose to decline transactions that are made in this way.

Credit card fees are similar to the statues involved in Mount Rushmore; most people know they exist but not so many understand the details – who are the people involved, exactly how large are they and, more importantly, just why?!

Well, here are some answers for you.  The people that benefit most from credit card fees are the credit card issuers themselves; each business that accepts credit cards as a form of payment pays a fee and, of this fee, approximately 85% goes to the issuing bank!  The rest of the money goes mainly to the credit card processor – which is normally Visa or MasterCard since they own 75% of the market!

75%!

Considering that almost every merchant service – and certainly every big business – accepts payment in the form of credit or debit card, it doesn’t take the financial genius of Michael Martin to realise that there is lot of money to be made on these credit card fees, rightly or wrongly.  After all, what is it that these companies are actually doing for their money?

Well for starters, using a credit card is meant to help protect you from fraud, entitles you to refunds and includes other protective methods.  Furthermore, they provide customer service and, of course, pay for everything you buy before the money is taken from your account.  The biggest expenditure, however, is the rewards schemes that credit cards offer; around 40% of all fees generated by credit card issuers are the direct product of the rewards schemes that they use to lure people in to start with!  Examples of these rewards include air miles, free balance transfers and reward points that can be collected and spent on a variety of lovely things, like money-off car insurance!

So, despite the fact that only Marvin the Paranoid Android has a chance at understanding the “complimentary” monthly statements and transaction reports; all these things have to be paid for – and apparently Visa needs to make an average of $0.07 for every transaction made in the world in order to provide this service…  After all, their quarterly net income in April was a mere $536 million!  As for the credit card providers and banks; how else can they afford to give out so many generous bonuses without charging everybody else for it?

In conclusion, despite the fact that credit cards are almost a necessity in modern life, the ridiculous fees that we end up paying are essentially there to make more money for the people that pressure you into needing them in the first place.  But that’s the way of the world eh?

Oh and finally; Mount Rushmore National was created by Gutzon Borglum, and comprises of 4, 18-metre high heads of George Washington , Thomas Jefferson, Theodore Roosevelt and Abraham Lincoln.  Apparently the entire memorial covers 5.17 km2!  It was created as a memorial because 150 years is quite a lot of history in the States!

It

Despite the recently released fraud statistics showing that card fraud has increased, as a percentage of the overall turnover of card transactions card fraud has decreased. This is due to more card transactions being made today than were made a few years ago, showing that card payments are becoming evermore popular and that confidence in using cards for transactions is increasing. This highlights the success that chip and PIN has had on increasing security since its introduction and this has resulted in the general public’s increased confidence in merchant services and making payments on plastic.

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Before diving into our first post, allow me to welcome you to the Seymour Direct Blog. For our first post I considered it appropriate to take a look back at the history of plastic cards. By taking a look back to the past I hope that we can understand how we have arrived at where we are today and, as a result, be in a position to look at how we use our cards today, both from the perspective of individuals and businesses.

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