It has been more than a year now since chip cards were introduced in the Canadian market as an enhancement to the regular credit and debit card. The new chip-embedded cards were implemented as a means to eliminate fraud. The idea was to have customers punch in a PIN code as opposed to signing a receipt slip so that potential thiefs and counterfeiters could not take advantage of lost or stolen cards.
The high rate of fraud, according to the banks, was a main culprit for such high interest rates on credit card accounts. QMI Agency’s Stefania Moretti reports today, however, that over a year after the new chip cards have come out, interest rates in Canada remain high. She writes that in Europe, where the new cards were introduced nearly ten years ago, credit card fraud has decreased up to 80%.
In Canada, the rollout of the chip cards is about complete, and credit card fraud has all but been elminated. However, the nation has not enjoyed the same drop in interest rates, according to Consumers’ Association of Canada president, Bruce Cran. Instead, the rates remain around 19% on average.
Said Cran: “(The chip cards) almost eliminated fraud, which was the main reason, according to the banks, that the credit card interest rates were so high…At the moment, there’s been no such reduction. I think consumers are entitled to see some sort of an advantage coming from all the inconveniences we had with putting up with the chip technology.”
Cran insists that responsibility to pay for the high fraud rates on cards used to be on the shoulders of the credit card users. The new chip cards were supposed to remove that responsibility. He believes strongly that the banks need to remove the burden from the customers, based on the much lower incidents of fraud.
“The deal, I think as consumers understood it, was that if we put up with all the other inconveniences that have come with the new chip card, such as standing in line and all the rest of it, that we would benefit from it,” said Cran, “At the moment there has been no sign of that. It seems the banks are very interested in hanging on to all that profit from themselves.”
Morretti reports that Amex, MasterCard and Visa lost upwards of $358 million due to fraud last year. This was down from $407 million in 2008. It is expected that these numbers will continue to drop this year as the impact of the new chip technology becomes more apparent.
Whether or not interest rates will soon see a decrease as well is anyone’s guess, at this point. At least Canada is not experiencing an increase in credit card fees like credit card holders in the United States. Down south, the chip technology has not yet been widely implemented.