President Obama Tightens Security on Government-Issued Debit Cards

October 17, 2014, Written By John H. Oldshue
CHARLOTTE, NC - SEP 21:  Democratic nominee, Barack Obama, makes

Even the federal government is feeling uneasy about the security of debit and credit cards.

Reacting to the incredible number of data breaches at major retail chains, the United States government will now require that all federal benefits issued via debit cards be done so with cards that contain chip technology.

President Barack Obama announced today that he is signing an executive order called BuySecure that will tighten security on these government issued debit cards.

The government distributes some federal benefits, such as payments for social security, disability and veterans’ benefits, on debit cards. These debit cards will now need to contain chip technology, rather than a magnetic strip, to make them more secure.

In March 2013, the Treasury Department made it a requirement for anyone receiving government benefits to do so by electronic deposit in their bank account or by a prepaid debit card. This was mainly a cost saving move by the government: according to Treasury officials, a mailed check costs the government 92 cents more than a payment made by electronic transfer.

As of mid-2013, a little over 90% of the benefits were made via direct deposit. But over five million consumers–mostly unbanked citizens—still received benefits through a debit card program called “Direct Express” which is run by Comerica Inc.

Magnetic strip debit and credit cards are much easier to skim and copy than cards that contain an embedded chip. The chip encrypts data in a different manner with each transaction. Magnetic strip credit cards do not, and the data on a magnetic card is more vulnerable as a result.

Significant data breaches have taken place throughout the last 12 months at some major retail chains: Target, Neiman Marcus, Michaels, P.F. Chang’s, Dairy Queen, UPS Stores, Sally Beauty, Supervalu, Albertsons, Home Depot and this week, Kmart. The Department of Homeland Security estimates more than 1,000 businesses have been affected by the Backoff malware that led to these breaches.

Some major banks such as Bank of America have already begun issuing debit cards with chip and PIN technology.



The information contained within this article was accurate as of October 17, 2014. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.