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Why the U.S. Leaves Its Credit-Card System Vulnerable to Fraud

When Target said last week that the personal information of 40 million of its customers had been stolen, it pointed attention toward a quirk in the U.S. credit system: American businesses haven’t adopted widely available technology that would make it far more difficult to commit credit-card fraud. And while the credit-card industry says a solution will be in place in late 2015, skeptics say the U.S. could lag global practices for much longer than that.

The issue is the continued use of magnetic stripes on the back of credit cards. Most other countries abandoned this technology long ago. They’ve switched to cards with embedded chips that generate a new code for every transaction, making cards very difficult to counterfeit. On the other hand, it’s easy to make fake magnetic stripes. It’s not clear how  Target was hacked—the company isn’t telling—but the U.S. is a great place to cash in for whoever got that information.