Why Credit Cards Don't Have PINs

Other countries use PINs with their credit cards.

Other countries use PINs with their credit cards.

Unless you use your credit card at an ATM to take out cash advances, you've probably never entered a personal identification number when you used one. Since you always have to enter a PIN for your ATM card, you'd think your credit card would have one. In some parts of the world, they do. However, the U.S. credit card industry grew up without PINs and is changing slowly.

First Credit Cards

In the first half of the 20th century, stores started issuing their own cards. WIth the release of the Diner's Club card in 1950, the American Express card in 1959 and the BankAmericard in 1958 as a single bank card, the credit card industry started to grow. The BankAmericard became a franchised card in 1966 and was the precursor to Visa. There were no electronic terminals back then, so you wouldn't have been able to use a PIN.

Network vs. Cards

In the 1970s and 1980s, U.S.-based credit card companies developed electronic authorization systems. These systems used phone lines to check out credit cards and authorize transactions. This system was a major advance over the old system, in which merchants had to call for authorization or look the card up in a book. You could have used a PIN with that system, but ATMs were rare -- only 2,000 in the United States in 1973 -- so people weren't used to entering PINs. And it would have cost more to build a PIN infrastructure into cards and readers.


The U.S. credit card infrastructure is still based around magnetic stripe credit cards. Moving to a PIN-based system would require two major changes. First, credit card issuers would have to replace all of their cards with either chip-based cards or contactless cards using radio frequency identification. Given that a regular card costs around $2 and a chip card costs $15 to $20, the shift would be expensive. Second, issuers would need to replace or reprogram credit card readers. And banks wouldn't benefit from improving security: In other countries, requiring PINs for credit cards lets issuers shift the liability for fraud to the cardholders, but U.S. laws don't allow this.

Chip-and-PIN Future

Change might be coming. To limit fraud, credit card networks are moving toward a chip-and-PIN system like that many European companies employ. In 2012, Visa started offering special terms to merchants that used chip-based transactions. Beginnng in 2017, Visa plans to hold banks responsible for the cost of fraudulent fuel purchases instead of Visa absorbing that cost.

Smart Cards and PINs

U.S. issuers are starting to support the global chip-and-pin standard. Visa began requiring processors to support chip-and-pin cards in 2013, and it's starting to push the technology by gradually making the banks that service the merchants, instead of the cardholders, liable for the costs of fraud. MasterCard is following the Visa timetable and will require fuel dispensers to accept PINs by 2017, and other terminals must support them by 2015.


About the Author

Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.

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