Credit card Security issues

My bank just phoned in telling that my credit card was “compromised” and they had to kill it.

Now i’d like to know:

1) How can you assure me no one reads my data, neither site admins?

2) Is it possible that a securuty breach in your database exposes customers to credit card fraud?. Do you keep credit card details of every customer here stored in encrypted way or not? Who has the key?

3) Why don’t you use an external site as paypal for payment (and they spend millions in security for sure…)?