The PIN scam

The use of PINs for credit card transactions has now become compulsory in the UK. Previously all we had to do was sign a slip to authenticate our credit card purchases. Now we have to enter a PIN into a machine by the cash register. It has been claimed that the change will reduce credit card fraud, and it probably will. The change will save the banks quite a bit of money. However, how does the use of PINs benefit the credit card user?

Will the banks pass on some of the money they save to their customers in terms of reduced interest rates or transaction charges? I doubt it.

Will the use of PINs make it quicker and easier to buy by credit card? Not from what I have seen. Transactions now seem to take longer.

What will happen is that it will be harder to get your losses refunded if your card is used fraudulently. A lot of people will find it hard to remember their PIN number and will write them down. When their wallet or handbag is stolen the their will get both card and number. I suspect that what is happening is that the banks have found a way to reduce their liability to reimburse customers for their losses. The banks can now say that you must not only have lost your card, but you must also have carelessly disclosed your PIN number.

Credit card users also face another risk. If someone knows your PIN and have your card they can withdraw money from an ATM. Previously card users did not have to disclose their PIN when making a credit card purchase. They only needed it when they withdrew money on their credit card from an ATM. Now they have to use their PIN for all card transactions, and consequently face an increased risk of fraud.

The end result of the change to compulsory PIN usage is that the banks have reduced their risks, and card users have increased theirs. i have not noticed any comment in the media bout this nice scam. It will be interesting to see if they realise what has actually happened.

Since PIN usage became compulsory I have only used my credit card for online purchases. For everything else, I use cash. It gives me better control over my spending and I pass through the tills faster.

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