You may have received a new credit card recently, whether you requested it or not. Did you notice that it looks different? It probably contains a little gold or silver chip on the front in addition to the more familiar mag stripe on the back of the card. Now that October is here, these new EMV or “chip” cards are being reissued in droves to cardholders across the U.S.
And what happens in October? This is when the responsibility for credit card fraud, which has previously been shouldered by credit card companies and issuing banks, will shift to the merchants where the fraud occurred — but only if the merchant doesn’t have a chip card reader on their point of sale (POS) device.
Huh?
Here’s what you need to know:
1) EMV isn’t replacing the mag stripe – yet
Larger merchants like your local superstore or grocery store have likely already upgraded the POS terminals where you’ve previously swiped your card. Have you noticed? If you don’t have a chip card yet, your traditional mag stripe card will still work on all new terminals. However, if you do have a chip card and you try to swipe it, the terminal will instruct you to “dip” the card and complete the transaction using that method.
A survey conducted by Software Advice found that just 22 percent of small- to medium-sized businesses are EMV compliant. If you come across a merchant that doesn’t have a chip reader, you will still be able to use the mag stripe on your new card just the same as before. But take note – swiping a chip card isn’t more secure than swiping a regular card.
2) Remember to “dip” the “chip”
One major difference between the mag stripe swipe and the chip dip is that previously, the card is swiped once and then isn’t needed again to complete the transaction. This will change with the new EMV cards. You will be required to insert the card into the reader and then finalize the transaction by adding a tip, signing your name, or entering your PIN, all while the card is still in the card reader. This process allows for the chip to encrypt the data to secure the transaction. Just don’t forget to grab your card before you walk away!
3) Online merchants won’t benefit from the transition If you plan to purchase something online with your new chip card, don’t be surprised when the process is exactly the same as before. Unfortunately, online or Card Not Present (CNP) transactions won’t be able to take advantage of the added fraud protection offered by a chip. It’s predicted that most of the fraud found today will shift elsewhere to:
- Small merchants, banks, and credit unions
- ID theft and CNP transactions
- Deposit accounts
- Electronic payments
It’s also worth noting that gas stations will not be upgrading their equipment until October 2017, so the pump will continue to be a target for offline fraud.
4) Chip-and-PIN is more secure than Chip-and-Signature
If you have received your new chip-enabled card already, it will likely require your signature instead of a PIN number. Unfortunately, this means the card isn’t quite as safe as it could be, since PIN numbers are harder for fraudsters to steal than forging your signature. The Federal Reserve has already reported that PIN transactions are 700 percent more secure. If this is a concern for you, reach out to your bank or card issuer and see if they can provide you with a card that supports chip-and-PIN.
5) The U.S. is really late to the party
This technology has been available around the world for decades. It was first used in France in the late 1980s, and is present in most countries outside of the U.S. Currently, around half of the world’s credit card fraud occurs in the United States alone due to our continued use of the mag stripe — a dated technology. So don’t be afraid of the chip; it’s a good thing!
While the EMV rollout might be a bit of transitional headache for cardholders, card issuers and merchants alike, the enhanced security should pay off in the long run by paving the way for new and even more secure technology to come.