Researchers find security flaw with chip-based credit cards

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Stores Still Aren't Ready for Chip-and-Pin Credit Cards

Chip-based credit cards have become increasingly more common as magnetic strip technology fades away. While chip-based cards still have the magnetic strip, machines are programmed to tell you to use the chip.

The new cards with the chip-based system, called EMV, have been lauded for being "nearly impossible" to counterfeit. CNN Money reported, however, that there are still security concerns emerging.

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Tech researchers at the NCR Corporation, a payment technology company, have demonstrated how thieves can get around the chip. Hackers can rewrite the code in the strip, making it act like a chip-less card again; then, they can steal the card information.

The code can be rewritten because many retailers do not encrypt transactions through their payment machines. This makes card information vulnerable. Payment machines are not encrypted by default, so stores have to pay more to do so and thus protect their customers.

RELATED: Chip and "smart-chip" cards

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BERLIN, GERMANY - DECEMBER 10: Memory chip on a credit card, master card on December 10, 2014 in Berlin, Germany. (Photo by Thomas Trutschel/Photothek via Getty Images)
A customer enters their pin number as they make a chip and pin payment via a Verifone Systems Inc. credit card payment device at a restaurant in London, U.K., on Friday, May 22, 2015. Credit and debit cards that can be used by tapping the reader are gaining users, and mobile apps are set to further boost the popularity of contactless paying. Photographer: Simon Dawson/Bloomberg via Getty Images
An employee demonstrates the use of an iZettle chip and pin reader mobile payment device at the iZettle AB headquarters in Stockholm, Sweden, on Friday, Aug. 28, 2015. Swedish payments startup iZettle AB, a rival to Twitter Inc.founder Jack Dorsey's Square Inc., raised 60 million euros ($67 million) to expand in Europe and fund a plan to offer merchants cash advances on future card sales. Photographer: Johan Jeppsson/Bloomberg via Getty Images
BERLIN, GERMANY - DECEMBER 10: Memory chip on an EC card on December 10, 2014 in Berlin, Germany. (Photo by Thomas Trutschel/Photothek via Getty Images)
Service Manager Morgan Mallory holds a Rail table side credit card processing device at Tableau, a Dickie Brennan & Co. restaurant, in New Orleans, Monday, June 15, 2015. Dickie Brennan & Co., which operates four New Orleans restaurants, expects to pay more than $25,000 to replace card readers and software once chip cards are phased in and magnetic stripe cards, which are easier for thieves to copy, are phased out. (AP Photo/Gerald Herbert)
Patron Jake Kratz, of Philadelphia, pays his tab with the Rail table side credit card processing device at Tableau, a Dickie Brennan & Co. restaurant, in New Orleans, Monday, June 15, 2015. Dickie Brennan & Co., which operates four New Orleans restaurants, expects to pay more than $25,000 to replace card readers and software once chip cards are phased in and magnetic stripe cards, which are easier for thieves to copy, are phased out. (AP Photo/Gerald Herbert)
FILE - In this Nov. 18, 2009, file photo, a MasterCard credit card with a computer chip is posed for a photo in Gelsenkirchen, Germany. By autumn 2015, millions of Americans will switch to credit cards with a computer chip instead of a magnetic strip _ 50-year-old technology that lingers on the back of U.S. cards and is easily copied by thieves, leaving people vulnerable to fraud. (AP Photo/Martin Meissner, File)
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Two examples of this occurring in national retailers are the hacks that Target and the Home Depot experienced two years ago, where many customers experienced credit card theft.

"There's a common misperception EMV solves everything. It doesn't," said Patrick Watson, one of the researchers.

NCR advised that retailers "encrypt everything" during a transaction and encouraged customers to pay by app or another high-tech option when available.

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