Nightly News   |  December 23, 2013

Could a credit-card chip be the secret to security?

The U.S. relies on credit cards with magnetic strips to hold account information, but a card with a secure digital chip may be a better alternative. NBC’s Gabe Gutierrez reports.

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>>> are still out there, and still at it tonight, in stores and malls, and on local main streets all across our country on this eve of christmas eve . and millions are right now, tonight, making credit card purchases, just days after the entire chain of target stores was hit by a massive credit card hack. but given the fact that we're living in the electronic age , the current generation of credit cards dates back to the stone age of technology. and a lot of consumers would like to know how much longer they'll be forced to endure that sinking feeling of handing over a credit card , knowing it can put you at great risk. it's where we begin tonight with nbc's gabe gutierrez.

>> reporter: in the wake of one of the largest retail breaches in u.s. history , many customers are changing the way they shop.

>> i think i'll start using cash. cash only.

>> reporter: even after target offered a 10% discount and free credit monitoring , some customers aren't satisfied. to contain the damage jpmorgan chase is now restricting shoppers who use their chase card at target to a $100 limit on withdrawals and a $300 cap on purchases.

>> 10% discount, as opposed to identity theft and all the problems involved with that, isn't worth it to me.

>> reporter: so far, there are several class action lawsuits against target. and attorneys general in at least four states have asked the retail chain for information about the breach. today target said it's cooperating fully, and working around the clock to make things right. but the reporter who broke the story says cloned cards are selling on the black market for $20 to $100.

>> we don't know a whole lot about how the bad guys got in.

>> reporter: the u.s. relies on magnetic strips to hold account information. essentially the same technology as old cassette tapes. 80 other countries use a more discuss digital chip that generates a unique code every time it's used. making it harder to reproduce the card. much of europe has used the technology for a decade.

>> splartchip cards have proven to be much safer. and other countries that have already adopted this technology, they've seen fraud rates drop by as much as 67%.

>> reporter: until recently, u.s. card companies had held off switching to the more expensive chips. but they're now starting to roll the cards out, and we could see all major retailers accepting them by late 2015 . still experts say the new cards won't solve every problem.

>> the chips will prevent one kind of fraud. card cloning. but they won't prevent online fraud . they won't prevent if someone steals your wallet and steals your card. so they're a good step but it's just a baby step.

>> reporter: and there are some disappointing retail numbers out tonight. although it is unclear how the target security breach impacted the numbers. according to shopper track holiday sales this past week when compared to last year were down 3% and foot traffic in stores, plummeted by