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Industry News

Chip-and-pin technology has reduced fraud, but not interest rates

By Kristen Lawrence

26/07/2010 - With the introduction of credit card chip technology, consumers charging purchases at credit card machines were promised savings in interest rate charges, but have not seen them yet.

Chip technology, which requires a secure PIN to be entered with purchase rather than swipe, was introduced by Canadian banks more than a year ago as a measure to help prevent fraud, CNEWS reports. And with potential fraud being one of the reasons for high interest rates, a decrease in fraud was epected to lessen interest rates.

CBA spokesman Laura Drew-Lytle, however, told the source that fraud is only a small part of determining interest rates. "It's unsecured lending and that is riskier. Because it's riskier, the interest rate is typically higher," she said.

Those who bank with financial institutions which have failed to invest in the chip-and-pin technology may face challenges when trying to swipe abroad. Europe has been using the technology for more than two years now, meaning Americans abroad will be waiting in line more for the ATM.

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