Learning how to manage money from an in-school bank

The first student-run bank branches in Los Angeles have just opened in the Lincoln Heights and Crenshaw neighborhoods. These arent pretend banks with Monopoly money up for trade — theyre actual, operating branches of the financial giant Union Bank.

A big bank brand in a school may give some pause, but for teens its a window into the world of finance.For the California Report, reporter Alex Schmidt has more.

High school senior Jerry Liu politely helps a peer with her bank deposit.

May I please have you swipe this? he asks as she punches in her pin.

How much would you like to deposit?


Wearing a red Union Bank polo shirt, Liu looks like he could be in any bank branch, with a waiting area and even a decorative plant on the table. But right outside this island of adulthood is a hallway of Lincoln High School.

This is one of three student-run Union Bank branches in California. The first opened in Fresno a few years ago and its the first one in Los Angeles, with another branch in the Crenshaw neighborhood that opened shortly after. All three branches them are in lower income, immigrant heavy neighborhoods. Only students, faculty and parents can bank there, but the accounts are very real, and so are the bank cards. Liu is one of the 12 student bankers at Lincoln.

It taught me a lot of new things, he says. I was really worried about finances before I go off to college, and it opened my eyes to a lot of that new world.

Union Bank trained Liu to work as a teller, and will give him a stipend and scholarship totaling $1,500. To LA Unified School District Board Member Monica Garcia, it seemed like an obvious win-win.

I thought the innovation of the student-run bank would be something that fits into our mission of college ready, career prepared graduates, she says.

Many schools across the country are experimenting with student banking, though Union Bank is one of the biggest to enter the field. Its a growing trend, but one that has operated without much oversight. The person who has likely studied the phenomenon more than anyone else is J. Michael Collins, a professor of consumer finance at the University of Wisconsin-Madison.

Whenever you have a school system that doesnt have a bank branch, and we suddenly introduce a bank or credit union branch, you have some parents who say, Well, why would we allow that particular bank branch. Arent we granting them a monopoly on these relatively naive, unsophisticated children?

Union Bank did not have to compete with other banks to enter LAUSD — board member Garcia called it a pilot project, and said that if other banks wanted to enter schools, that LAUSD would release a RFP. Union Bank spent $200,000 on building each branch, and it pays to staff them with managers. Skeptics may wonder about the motivations for a bank to make such an investment. But Collins believes its mainly a PR and marketing move, albeit one the school district thinks benefits students. Union Bank claims its not entering schools for profit.

We dont expect to make money, says Jan Woolsey, head of Community Reinvestment at Union Bank. Certainly, I think itll be good for our brand that were making this kind of investment in young people and communities that need us. But really and truly, our motivation is: ow do we help strengthen communities and make them healthier.

Love banks or hate them, operating outside the financial system is difficult, and even opens up vulnerable groups to predatory lending. A high school bank branch could bring unbanked families into the system. The student bankers love their jobs they build up their resumes, learn new skills, make money, and a few have even gotten actual jobs with Union Bank. Those who bank there like it too. A Lincoln High Junior waited in line recently to make a deposit. LAUSD policy dictated that her name not be used.

This is my first savings account. Its better than a piggy bank because you have to actually think about it to take money out if you want to, and its easier to save, she says.

Its relative early days in the history of easy credit and insecure pensions, and American society has not collectively figured out how to cultivate financially savvy consumers in this climate.

We are in a bit of a grand experiment with financial literacy in schools. And as I reflect on all the different approaches that are out there, this very simple concept of placing a bank branch in a school setting seems to have a lot of bang for the buck, Collins says.

As more and more schools try student banking, the Treasury Department is considering a special designation for these branches. Union Bank has plans to expand to more campuses, which could be great for the balances in college savings accounts.

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Commonsense Financial Tips: Don’t Put Money Under the Mattress

I dont know what to do, said my good friend Rob after inviting my wife Jo and me to dinner for the third time in two weeks. I know I should do something. Every time I think about it, it scares the hell out of me! Maybe I should just hide everything under the mattress.

Rob is a sharp guyhes done well for himself and his family. He also recently settled the last details of his parents estate. Upon banking part of his inheritance, the branch manager magically appeared, introduced himself, and invited Rob into his office to discuss some really good rates the bank had to offer.

Not even the drive-through window has helped Rob fly under the radar. It still takes but a few seconds before the manager appears and starts his pitch. Rob has started to wonder if the drive-through tellers have a bright yellow sic lsquo;em button.

Rob is a veteran subscriber toMillers Money Forever. He reads our material faithfully and isnt shy about asking questions. He knew for two years this large influx of cash was coming, and hes made it a point to learn how to handle it.

Up to that point, Robs wealth consisted of home equity, retirement plans managed by others, and some collectibles. Now he has a sizable chunk of cash to invest, and hes understandably scared.

So far, Rob has lots of book learning under his belt, but little real-life investing experience. Every option we discussed at that third dinner evoked a Yeshellip; but! After much back and forth, I finally realized Robs Achilles heel wasnt a lack of investment knowledge. Instead, it was his fear.

And Rob is not alone. The following morning, I received a timely message from subscriber and regular correspondent, Bee H. She shared a laundry list of places to put your moneybanks, real estate, precious metals, annuities, a mattressandallthe horrible ends that money could meet in those places. Government seizure, market crashes, eminent domain, theft, inflationhellip; the list went on.

Bees concerns are not unfounded. I even shared them with Rob under the heading: See, you arent alone.

Robs response: Wow. Shes reading my mail! Im stewing over this very same issuehellip;

Then it hit me hard: What are they afraid of? Not the market and investing, but rather the adverse consequences of government behavior. After nearly every Yes, but, Rob expressed fear about what the government might do: a haircut, bailout, bail-in, outright confiscation. Call it what you will.

These fears cross partisan lines. We all have some senseeven if we cant quite put our finger on itthat our personal and economic liberties are threatened. Heck, every time I look in the sky now, I scan for NSA drones. If I see a tiny speck, I look at the television camera, wave my hand, and say, Hi, Mom!

Many of my friendsIndependents, Libertarians, Republicans, Democrats, even a Green Party member or twohave told me, For the first time in my life, Im afraid of our government.

Commonsense Alternatives to Your Mattress

If youve been reading my articles for any length of time, you know I worship at the altar of practical wisdom. So, my response to Rob and Bee came from that same place.

  • Maintain perspective.You cant get rid of these political risks entirely (although a little international diversification will help). Vote for the candidates you think are least likely to make things worse and move on.

    Learn the rules, pay your taxes, and fill out the proper forms. You dont have to like it, but the punishments for noncompliance can be harsh. Behaving yourself is the best route.

    Plan and execute a retirement approach that will be successful despite foolhardy government action. This is more challenging than it was for our parents generation, but it is within your reach.

  • Pay off debt.Rob told his accountant he was going to pay off his house with part of his inheritance. His accountant replied, No! Thats a terrible plan. Invest the money! You can earn better returns than the interest rate on your mortgage.

    Are you kidding me? Robs a rookie investor whos scared to death, and his accountant is telling him to go into the market with borrowed money? Hell, that guy might as well have shown him how to buy on margin while he was at it! Rob held his ground, saying, I plan to get out of debt and stay that way.

  • Keep saving.Once youre out of debt, start making those debt service payments to yourself each month,first. Then live on the rest. Concerns about government confiscation or higher taxes should motivate you to save even more. If the worst comes, you want to have enough left over so you and your family survive.
  • Get a financial checkup.Find agood financial planner, preferably one with a fiduciary responsibility to you (not all have that). Mark your goals, set a realistic plan, and check in annually.
  • Never turn over all of your money to a money manager.Some money? Sure. But ultimately, the only way to protect your money is to learn how to invest it yourself.

    The first time you click your mouse to make a real trade, your heart will be racing. Its an emotional experience, but each tradegood or badteaches you something and brings more confidence.

  • Understand the motivations of brokerage firms, insurance agents, and banks.Rob experienced this in action. The branch manager offered him a special rate on a CD that wouldnt even keep up with inflation.

    Brokers and captive houses will gladly do a free financial checkup and encourage you to put your money in their company-sponsored funds. The same is true of insurance companies. While there may be better options, they push for what compensates them the best.Caveat emptor!

    A money manager with a fiduciary responsibility must put your interests ahead of theirs. You want advice from people who are not stakeholders.

    Always ask, Are there better options available?

  • Learn the lessons pundits cannot always teach.When you make an asset purchase, write down why. What is your stop loss, and what are your earnings targets? When you sell, investigate what made you successful or what happened that caused you to lose money.

    Youll take some losses. Just dont panic! They dont have to be expensive learning experiences. As a wise old baseball coach once said, Make your outs count!

  • Doing nothing is a choice.Its an expensive one at that, as your cash loses its buying power to inflation. Invest to protect, invest for income, invest for growth.
  • Take a giant leap of faithhellip; in yourself.Trust your ability to learn, assess a situation, control your emotions, and exercise sound judgment. Youve already honed those skills in other areas of life; now its time to apply them to investing.

Throughout history governments have taxed, spent other peoples money, and made stupid rules. People have succeeded anyway, and you can be among them. Our free weekly newsletter, Millers Money Weekly, can help guide you through the traps and pitfalls of personal finance and help you navigate toward a retirement on your own terms. Sign up now, for free.The article Is It Time to Hide Your Money Under the Mattress? was originally published at millersmoney.com.

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Visa, MasterCard renew push for chips in credit cards

Visa and MasterCard are renewing a push to speed the adoption of microchips into US credit and debit cards in the wake of recent high-profile data breaches, including this weeks revelation that hackers stole consumer data from eBays computer systems.

In this Nov. 18, 2009 file photo, a Mastercard chip-based credit card is posed for a photo in Gelsenkirchen, Germany. In the wake of recent high-profile data breaches, including this weeks revelation that hackers stole consumer data from eBays computer systems, Visa and MasterCard are renewing a push to speed the adoption of microchips into US credit and debit cards. (AP Photo/Martin Meissner, File)

This Nov. 18, 2009 file photo shows credit and bank cards with electronic chips in Gelsenkirchen, Germany. In the wake of recent high-profile data breaches, including this weeks revelation that hackers stole consumer data from eBays computer systems, Visa and MasterCard are renewing a push to speed the adoption of microchips into US credit and debit cards. (AP Photo/Martin Meissner, File)

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Tap and Go increases crime


TONY JONES, PRESENTER: Tap-and-go bank cards are being blamed for a rise in crime statistics in Victoria.

Victoria Police say theft and misuse of the cards, which dont need a pin, are behind a five per cent increase in crime rates.

The chief commissioner says police were not consulted before tap-and-go cards went on the market and he regrets their introduction.

KEN LAY, CHIEF COMMISSIONER, VICTORIA POLICE: Theyre chewing up an enormous amount of police resources. The banks obviously build in a margin where they absorb the cost of the theft, which is fine for the banks.

TONY JONES: Banks are defending the cards, but the Victorian Government wants more done to prevent their misuse.

Do you have a comment or a story idea? Get in touch with the Lateline team by clicking here.

Money Experts Say When it Comes to Marriage, It Pays to Talk

There are pros and cons of getting married, financial as much as anything else. NY1s Tara Lynn Wagner filed the following report.

First comes love. Then comes marriage. But before you walk this walk, you definitely need to have a long talk about money.

Even though you want to believe that marriage is all about love and butterflies and all those good things, finances should be one of the first things you should consider before you take that big step and get married, says Yahoo Personal Finance Expert Mandi Woodruff.

Thats because like it or not, when you tie the knot, you wed your finances too and that could end up helping or hurting your bottom line.

For instance, one of the biggest gifts you may get could come from your employer in the form of health insurance for your spouse.

Large employers, on average, pay about 85 percent of the premium both for their workers and their dependents, so you and your spouse will end up with a much more robust policy at a fraction of the cost if you had to buy it on your own, says Amanda Gengler, who writes for Money Magazine.

Putting a premium on marriage could help lower your car insurance rates as well.

One of the funny things that happens when you get married is insurance companies look at you and say hey, this person is a little bit more stable even though they may be 25, 26 years old and you may see your auto insurance rates decline, says Woodruff.

But what about the so-called marriage penalty? Could wedded bliss lead to tears at tax time?

It might, particularly if both spouses are high earners. However its more likely that youll find yourself with a marriage bonus.

You and the spouse might end up paying less in taxes than you would if you were both single. So the trick is to figure out which of the two categories you will fall into, and the good news is that the people who land in the marriage bonus category–who owe less taxes as a married couple–far outweigh the number that have to pay additional taxes, says Gengler.

While you are whispering sweet nothings, tell each other your credit scores. It only takes one of you having bad credit to affect the rate you get on a mortgage or car loan.

Finally, like your marriage, managing your money is a lifetime commitment. Keep the conversation going or the honeymoon will be over before you know it.

My number one piece of financial advice is just talk about your finance. Do not be shy! So often what couples dont do is they dont communicate and that can really be what puts your marriage in jeopardy, Woodruff says.

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Can Money Really Buy You Happiness?

The answer to the age old question is in: money can buy you happiness. But not so fast, because its not that simple or straight forward. The reality is, what we do with our money each and every day matters. How we spend our money in the short term could have long term implications on our financial security. But who can really look that far ahead to see our future self when living a good life today is what matters? The reality — taking a long term approach to your money while enjoying todays simple luxuries is the key to success.

More money would mean greater happiness for those living on a fixed income or the working poor. For many of us, we wholeheartedly believe that if we had more money we would be happier. For people who have limited resources, more money would provide access to things most of us take for granted. For some of us more money means greater purchasing power and the ability to afford what we want in life. More money means more personal freedom and the ability to choose or make choices defined on our terms. For some it means power and status.

Money is the vehicle or tool used to buy lifestyle, buy comfort, and your happiness. But at every income level there are ways to reach satisfaction. The mean household income in Canada is $76,000. Researchers believe that there is a satiation point of happiness based on household income at $75,000 US What this means is our level of happiness peaks when our income or household income reaches $75,000 US If you make twice this amount of money, you may be able to buy a more luxurious house in a coveted neighborhood, but you are no happier then someone making $75,000. At first glance, this may seem a bit unbelievable.

For many of us it may be hard to believe that there is a satiation point around income and happiness because doesnt more money mean more happiness? I took a quick poll with some friends who agree that at a household income of $75,000 having a good life is possible. Yet, other researchers now believe that income and happiness are directly correlated. In other words, the more money we make, the happier we are. And, if you spend your money wisely on life experiences instead of things, you will be happier. Who to believe? Perhaps there is a different way of evaluating our happiness.

Life satisfaction is a way to view our lives and levels of happiness more holistically. The Gallup-Healthways Well-Being Index collected feedback from over 450,000 people around the world regarding their perceptions of money and happiness. Two ways to look at money and happiness were reviewed:

1- whether more money increases peoples emotional well-being or

2- whether more money increases peoples evaluation of their life.

Money has the power to give us more choices and personal freedom. If you view your money as a tool, resource or gift you know its value and what it can do for you. If you struggle with finding some meaning behind your money, you may want to redefine it or put your money into the bigger picture or a broader context. Think about embracing these winning strategies.

1. Live your best life, today. Take good care of yourself. Spend your money on nutritional food, on life experiences, and spending time with family and friends. This will increase your happiness levels.

2. Look for satisfaction in your life. By viewing your life more holistically and broadly, you will honestly get less hung up with how much money you have or make but rather on increasing your life satisfaction. Engage in activities that derive the greatest amount of satisfaction in your life

3. Live a goal centered approach. Most people who live by goals feel more in control and happier in their lives because they have a clear vision of where they are going.

Money has the power to make us happy but only to a certain point. But what matters more is living our best life today by living well. Of course, we must aspire for more, but perhaps what more is may not necessarily be more money it may be about spending our money in a way that derives more satisfaction. And, when we live by a set of values and make informed and conscious choices, we have the power to increase our life satisfaction and ultimately our happiness.


Business Latest: Feminine leadership mystique

THE FEMININE LEADERSHIP MYSTIQUE: In a single week earlier this month, Jill Abramson, the first woman to serve as Executive Editor of The New York Times, resigned under duress, and Natalie Nougayrède resigned as Editor-in-Chief of France’s leading newspaper, Le Monde, complaining in an open letter of having been undermined. What, if anything, do these high-profile dismissals tell us about women in senior workplace positions? Read more

BANKRUPTCY: Medical bills are the single biggest cause of bankruptcy in the country, and the majority of those bankruptcies involve people who already have insurance. How do drug prices play a role in people filing for bankruptcy protection, and how can they avoid it? Read more

KIMPTON CONVERTING RJR TOBACCO HQ:  Times are a-changin’ in downtown Winston-Salem as the former RJ Reynolds headquarters (the prototype for the Empire State Building) will be converted into a Kimpton boutique hotel. Smoking might not be allowed. Read more


How advisers bounce back from bankruptcy

Extraordinary circumstances sometimes force people into bankruptcy, he said. For instance, hes seen people declare bankruptcy because they had a child with special needs and were overwhelmed by medical bills. In another case, a client and his wife depended on two incomes, but she lost her job.

Unsurprisingly, the number of Americans filing for bankruptcy jumped during the nations economic downturn beginning in 2008. The number of non-business bankruptcies filed in US courts in 2010 reached 1.54 million, up from about 600,000 in 2006. Last year, there were just over 1 million non-business bankruptcies.

Overall, the face of bankruptcy has morphed in recent years and its more likely than ever to resemble a financial professional.

Bankruptcy attorney Jay Fleischman of Shaev Fleischman said hes worked with lots of financial advisers, insurance professionals and certified public accountants who have filed for bankruptcy, in some cases because their income took a stumble due to the vagaries of the market or real estate catastrophes.

The public thinks that personal bankruptcy is largely the providence of the middle class or lower middle class, he said. Over the last five to six years that has been turned on its head.

The typical bankruptcy filer now is far more likely to be more upper middle class or high-net-worth, as the economic collapse was felt more acutely by people who were making six and seven figures in 2006, he said.

Bankruptcy has become far more regular for those who were doing just fine, making money, owning cars and houses, a high net worth, and then the bottom dropped out of their holdings, Mr. Fleischman said. They did what they could under the law to get rid of their debts.

Personal bankruptcies typically are not plastered on the front page of newspapers, so to a large extent many clients and other associates may not even know about it. However, being forthright about it is usually the best plan, Mr. Fleischman said.

Im a big fan of transparency, especially in this day and age, he said. So many people have been through the ringer financially that bankruptcy doesnt have the same stigma that it did a decade ago.

Self-employed professionals should make sure they have set up a tax escrow account to pay quarterly taxes on time, Mr. Fleischman said. About 80% of the self-employed professionals who come to him with issues have fairly significant past-due tax obligations.

Mr. Buckley recommends all his clients who have filed for bankruptcy enroll in a credit rebuilding program so they get their FICO credit score back up above 720.

I encourage them to get a couple of credit cards and to make sure they use them in a responsible manner, Mr. Buckley said.

He also recommends financial professionals think twice before filing for bankruptcy.

It really should be a matter of last resort, Mr. Buckley said. When people call me, I try to explore whether they can downsize their housing, put kids in public schools or find other avenues to avoid bankruptcy.

Under Certified Financial Planner Board of Standards Inc. policy, the names of professionals who file for bankruptcy are regularly published and a note is made in their public profile. It stays a part of their electronic record for 10 years.

The board used to investigate its professionals who filed for bankruptcy, but changed its policy as of July 2012, when the pace of adviser bankruptcies picked up. The board pursued only one bankruptcy case in 2008, and the number rose to 49 in 2011.

The CFP Board, which still investigates its professionals if they have a second bankruptcy filing, printed the names of 48 more CFP professionals last month who have filed for bankruptcy in recent years. About 215 professionals in total have been named in releases as having filed for bankruptcy, and the vast majority of those remain active in the industry and continue to hold the CFP certification, according to an e-mail from CFP Board spokesman Dan Drummond. Nearly all the bankruptcies on the list are personal.

The names of CFPs who have filed for bankruptcy are provided to make sure consumers have adequate information to decide whether to engage a particular financial planner to help with financial decisions, the board said in its April 18 release.

The new subprime: brokers pitching 125 percent loans

* Looking for fast profits, financiers are slapping huge interest rates on risky loans — with little oversight

NEW YORK — Doug Naidus made his fortune selling a mortgage company to Deutsche Bank months before the US housing market collapsed. Now hes found a way to profit from loans to business owners with bad credit.

From an office near Times Square, people trained by a veteran of Jordan Belforts boiler room call truckers, contractors and florists across the country pitching loans with annual interest rates as high as 125 percent, according to more than two dozen former employees and clients. When borrowers cant pay, Naidus World Business Lenders seizes their vehicles and assets, sometimes sending them into bankruptcy.

Naidus isnt the only one turning to subprime business lending. Mortgage brokers and former stock salesmen looking for new ways to make fast profits are pushing the loans, which arent covered by federal consumer safeguards. Goldman Sachs and Google are among those financing his competitors, which charge similar rates.

This is the new predatory lending, said Mark Pinsky, president of Opportunity Finance Network, a group of lenders that help the poor. And the predators, just as they did in the mortgage market, have gotten increasingly aggressive.

Subprime business lending — the industry prefers to be called alternative — has swelled to more than $3 billion a year, estimates Marc Glazer, who has researched his competitors as head of Business Financial Services Inc., a lender in Coral Springs, Fla. Thats twice the volume of small loans guaranteed by the Small Business Administration.

Naidus, 48, chief executive officer of World Business Lenders, declined to be interviewed. Marcia Horowitz, a spokeswoman at public relations firm Rubenstein Associates Inc., said the company explains loan terms in plain English and takes steps to ensure that borrowers understand.

World Business Lenders sales and marketing techniques, as well as the interest rates it charges and the default rates it experiences, are generally consistent with those throughout the industry, Andy Occhino, general counsel for the company, wrote in a May 21 letter. In serving the underserved small-business community along Main Street USA, World Business Lenders complies with all applicable laws and endeavors to ensure a positive experience for its customers.

Maher and Tamer Kasem, a father and son who sell cigarettes and cosmetics to corner stores in Brooklyn and Philadelphia, are typical customers. They borrowed from World Business Lenders in December to keep their company afloat after being rejected by a bank and turned down for a hurricane-recovery loan.

A saleswoman initially talked about an unsecured $45,000 loan, they said. They had fallen further behind on bills by the time they received the final terms to borrow $12,500. The money, plus almost $1,000 in fees, was to be repaid over six months with $144.73 deducted from their bank account each business day, according to a contract they provided. That worked out to a total of $18,236 or an annualized rate, inclusive of fees, of about 110 percent.

Tamer and his mother. Lamis, said they signed personal guarantees that they would repay the money even if the business went bust, and the family put up a vacant lot as collateral.

I was just wanting to get money to survive my business any way, Maher Kasem, 57, said in an interview at his office in the Bensonhurst section of Brooklyn, where he keeps boxes of fruit-flavored cigars and makeup ruined in Superstorm Sandy stacked on the crumbling tile floor. Theyre slick.

World Business Lenders sued the Kasems and obtained a judgment for $22,828, which included a $3,879 prepayment fee. The firm hasnt yet foreclosed on the property, Kasem said.

Horowitz, the spokeswoman for World Business Lenders, said the company works with borrowers to avoid defaults.

If the default cannot be cured, World Business Lenders enforces its rights under the loan documents, including the recovery of the pledged collateral, she said.

Wall Street banks are helping the industry expand by lending originators money. Theyre starting to package the loans into securities that can be sold to investors, just as they did for subprime-mortgage lenders.

OnDeck Capital Inc., a lender with funding from Googles venture-capital arm and PayPal Inc. co-founder Peter Thiel, sold $175 million of notes backed by business debt last month in a deal put together by Deutsche Bank. Interest rates on the loans ranged from 29 percent to 134 percent, according to a report from credit rater DBRS Ltd., which labeled most of the deal investment grade.

Representatives for Thiel, Google Ventures and Goldman Sachs, which lends money to OnDeck, declined to comment.

Brokers are popping up around the country to originate loans on behalf of lenders including OnDeck and World Business Lenders. The companies pay fees to the brokers of about $6,000 for finding people willing to take a $50,000 loan, according to current and former brokers, most of whom asked not to be identified to preserve their job prospects.

Some stock brokers have jumped to business loans after getting kicked out of the securities industry by regulators.

Our industry is absolutely crazy, said Steven Delgado, who left World Business Lenders last year to become an independent loan broker. Theres lots of people whove been banned from brokerage. Theres no license you need to file for. Its pretty much unregulated.

New PIN-pass technology hacked

The chip technology on the current PIN-pass cards, the co-called EMV-chip, seems to have several vulnerabilities that make it possible to copy. The chip was first introduced to eliminate the threat of hacking. 

Researchers from the University of Cambridge discovered the leak, and published their findings in a paper called Chip and Skim: cloning EMV cards with the pre-play attack. The leak makes it easy to clone bank cards, which is called skimming. Copied bank cards are said to be able to pass even the bank’s own scrutiny. The researchers have shown practical research, and proven the leak.

According to the researchers, the current security system with the EMV-chip has two problems. The first is that for every card, a unique random authentication code has to be provided. It now seems that these codes are not random at all, which punctures the security.

The second problems is in the communication between the card terminal and the bank. According to the researchers, this can be intercepted without leaving a trace by, for example, the shop owner. This person can then clone a bank card, including the not-so-randomized authentication codes. This produces an identical card that the bank cannot distinguish from the real one.

Front page amp; upper left image: Source: Flickr/24oranges.nl