Credit card revolution – introducing computer chips

Say goodbye to the magnetic stripe – your credit card is about to get a whole lot smarter. From August 2007 major credit card providers Westpac and ANZ will be introducing smart credit – credit cards with computer chip (smartcard) functionality and there are whispers that the Commonwealth Bank is heading the same way – and very soon. Money Buddy evaluates the pros and cons for Australian users. 

Benefits to the banks

It’s the big credit names VISA and Mastercard driving the change – and to encourage lenders to get on side they are offering them all sorts of incentives including contributions to marketing campaigns and fee reductions of 25 percent. There are conditions though – lenders must have smartcard-ready terminals implemented by January 2009.

Smartcard credit will also allow banks to offer loyalty schemes, prepaid credit and multiple account access – all on one card. This will reduce their transaction costs – a major area of expense. 

Benefits to consumers

This multiple account functionality means people can do their banking remotely. It will also reduce the need to carry cash – you’ll be able to pre-load your card with “cash” for parking and other sundry expenses and still use the same card to access your credit. If you need to increase your credit limit you can do it without having to deal directly with your bank. As for security – there’ll be no need to sign. Instead, you can use a PIN code when you make a purchase. 

When?

Though changes are afoot, it’ll be a while before the consumer sees the impact. Till smartcard friendly terminals are introduced you may be carrying a card with a chip on it but not finding many places to work the magic. That said, with the Australian Payments Clearing Association considering adopting the move across the industry, by the sounds of it, it won’t be long before we have forgotten all about that now-familiar magnetic stripe.