Chip Credit and Debit Cards Are Here - Swipe or Dip?

At Worley Erhart-Graves Financial Advisors, we know how crucial it is to guard your identity, and we are following with great interest the developments in chip technology, or EMV. 

EMV is short for Europay, MasterCard and Visa, the three payment networks spearheading the chip card changeover. The technology has been proven to be more secure than magnetic stripes on credit cards, with some markets seeing as high as 80% drop in counterfeit fraud after chip adoption, according to discovernetwork.com.  

Bankrate.com explains the chips contain tiny microprocessors. When your card is either swiped like a regular card, dipped into a slot, or, in some cases registered as a “contactless” payment from a short distance away, the chip accomplishes two things: 

  •     Securely stores your payment information
  •     Sends a one-tim-use digital code to the payment terminal  

By the end of this year, almost half of all debit cards and the majority of all credit cards in the U.S. will be chipped. Chip technology isn’t exactly new, as Susan Tompor explains in USA Today. They’ve long been used in Canada and in Europe, while “the U.S. has been stuck in the swipe-and-sign mode for years.” Now, many of the major retailers have been rolling out new systems, including Target, Walmart, and Sam’s Club. It will take a while, though, for all merchants with point-of-sale devices in the store to have their chip-enabled systems in place.

Smaller merchants say their cost to convert to the new systems is too high. However, Doug Johnson of the American Bankers Association explains a “compromise” in the form of a chip-and-sign system, in which customers will still sign for their purchases rather than using a PIN.

Just a week away is the October deadline merchants have been dreading: those who have not updated point-of-sale devises to recognize chips will be held liable if there is fraud at the register (assuming the bank issued a card with a chip). Whoever has the older technology is liable for fraud. But, if both the bank and retailer have updated technology, the liability goes back to the bank. 

“In the current environment, all criminals have to do is take card information and create a card, using it to conduct unauthorized transactions,” explains bankrate.com. “EMV cards make that particular tactic very difficult.” 

“It’s important to understand that, at present, EMV is not a solution to the entire problem of data breaches and fraudulent transactions, cautions Bob Hunt of the Federal Reserve Bank of Philadelphia. “That is especially true for card-not-present transactions, such as purchases made on the internet.”

Chip credit and debit cards are here. Get ready to swipe and dip, but remain cautious about protecting your identity!

Content was prepared by a freelance journalist on behalf of Worley Erhart-Graves Financial Advisors