And the thieves got me

[ChuckJ]

I've been using a debit card off and on for I guess 20 or so years with no problem. Two weeks ago my bank sent me a new card that was "chipped for my protection" with instructions to destroy my old card. Monday I got a call from my bank's fraud prevention department telling me that my card was being used 250 miles away. They said that there were three transactions pending. They were informed that it was NOT me doing the transactions and to cancel the card. They said they would handle everything. I just got the chance to check my account today. They allowed the three pending transactions to go through ($299) so now I've got to jump through hoops with the bank to get them removed.

Can anyone tell me what is supposed to be so special about the chipped cards?

[Bad Dog]

One really cool thing about them is that they can be read from a short distance.  So, some one standing behind you in line with the right gear can read all the information on the chip without ever touching it.  Granted, not such good news for you but, great news for CC fraudsters.  I looked into those little card holders that are supposed to protect your information but, they seem to have mixed reviews as to how well they actually work.

[FunkyZero]

The potential for fraud still exists, even with the embedded encryption chip (Not to be confused with RIFD (radio RF) readers).
The chip just makes in near impossible to "clone" your card and use the clone at stores who require chip readers.
The clone could potentially still be used with the mag stripe at places that don't have chip readers though.
The chip makes for a very secure card, it's the lack of mandate to totally eliminate the mag strip that leaves them vulnerable.

One hint: never use a debit card online. Always use a credit card. The probability of someone eventually stealing then selling your card info is high. Credit cards are always the burden of the card issuer and they don't have direct access to your cash. Mind you, you'll eventually get your cash back, but it could takes days, weeks, even months.
I go a step further. If retailers don't have a chip reader, I won't use my debit card... credit card only. And always cover the pin pad when typing in your pin, a skimmer and camera could be just about anywhere and you can't even trust the cashiers anymore.
All someone needs in order to use your card are the basics: Card#, your name and the 3 digit code off the back. So next time you hand your debit card to a hostess to pay for your lunch and she disappears with it, think what she/he could be doing with it. It's no different than handing them your checkbook full of blanks. Leverage the credit card and pay it off every week. It's still a pain if you get jacked, but at least it's not YOUR cash that gets stolen.

[Ralph Wiggum]

Just got new "chip" cards from USAA.  Haven't used either much, but the few times the chip reader isn't active.  Supposed to be safer.  But don't know yet.

[franksolich]

One hint: never use a debit card online.

Oops. 

[FunkyZero]

Just got new "chip" cards from USAA.  Haven't used either much, but the few times the chip reader isn't active.  Supposed to be safer.  But don't know yet.

Essentially, all the chip does for you is guarantee that when you insert it into a chip-reading terminal, it is not and cannot be copied or intercepted while it is plugged in there and being read. Using the mag stripe does not give you this security and you should take every opportunity to harass and berate them for not having it yet if it's not enabled. For Christs sake, it's been out now for a really LONG time. They simply don't want to spend the money and they are leaving you open to security risks AND... the retailer will soon be responsible for eating the losses if anyone buys stuff from him using a cloned card if he doesn't have chip readers installed.
The chip does absolutely nothing for you when you swipe the mag stripe, use it online and type in your numbers, or hand it to someone in a restaurant, etc. That is why you should constantly insist that retailers get the damn things setup and running if they aren't already.
A lot of people confuse this encryption chip with the RFID enabled cards and they are 2 totally different things. I won't carry an RFID enabled card and most people want nothing to do with them... it appears that brilliant idea is dying off because no one will accept or adopt it, and thank goodness for that.

[ChuckJ]

This card was never used online. I think in the time that I had it I used it at one gas station (pay at the pump) once and another gas station (pay at the pump) two or three times. My wife's card got compromised late last year. Since then I inspect the machines before inserting my card. If they got mine via the at the pump machine I will give them credit for being slick because I saw nothing out of the ordinary.

[FunkyZero]

This card was never used online. I think in the time that I had it I used it at one gas station (pay at the pump) once and another gas station (pay at the pump) two or three times. My wife's card got compromised late last year. Since then I inspect the machines before inserting my card. If they got mine via the at the pump machine I will give them credit for being slick because I saw nothing out of the ordinary.

There are just so many ways the information could be stolen, it's difficult to say. It's even know that corrupt employees in the credit card processing system have stolen info before.
My position has always been to expect it to happen, eventually. That's why I stick with credit cards anywhere I'm not assured of a secure transaction. At least that keeps the thieves from having direct access to YOUR cash.
I've been jacked 3 times in 15 years on different credit cards. It's inevitable. You just have to keep an eye on your transactions and let the c/c issuer deal with it if anything happens. That's why we pay them, let it be their cash and their problem.