Did You Get a New Credit Card Recently? New Credit Cards May Fall Short on Fraud Control

Big U.S. banks are steering clear of an advanced security measure used in credit cards around the world, opting for a system that is more convenient for shoppers but may leave them vulnerable to fraud.

This year, firms ranging from J.P. Morgan Chase & Co. to Discover Financial Services Inc. are expected to roll out more than a half-billion new credit cards embedded with computer chips that create a unique code for each transaction, making counterfeiting much more difficult.

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In a retreat for the industry, however, the new cards don’t use some technology that could prevent fraud if a card is lost or stolen.

Instead of requiring customers to put in a personal identification number, or PIN, the new cards need users to authenticate credit-card transactions the same way they often do now, with a signature. PINs are widely considered to be more secure than signatures, which can be easily copied.

The more advanced “chip-and-PIN” technology has been adopted in Europe, Australia and Canada. The U.S. is one of the few developed countries not to embrace it.

U.S. bank executives said they are choosing the signature version so customers won’t be burdened at the checkout line to remember a new four-digit code.

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