More than six in 10 U.S. credit cardholders still don’t have a chip-enabled credit card, according to a new CreditCards.com report, even though there’s going to be a huge shift in credit card fraud liability starting tomorrow.
Beginning on October 1, the liability for credit card fraud will shift to merchants who haven’t upgraded their terminals to accept chip—or EMV—cards. The EMV stands for Europay, Mastercard and Visa. If your card information is used fraudulently after an in-person purchase after that date, the merchant will be responsible for the financial damages, not your credit card company.
“There could be some angry retailers,” says Matt Schulz, senior analyst for CreditCards.com. “This is most likely to affect smaller shops that don’t know about EMV and/or don’t want to incur the costs of upgrading.”
Chip cards contain a little metallic chip about the size of a fingernail on the front of the card. Instead of swiping your card, like you’ve done for decades, you will do something calling “dipping,” in which you insert the card into a slot, leave it there as you sign or enter a pin, and then take the card out. “It’s a major change as far as how to use a credit card,” Schulz says.
The new technology is important because it makes it harder for your card information to be stolen. First, it makes the physical card harder to duplicate. And second, every time you use a chip-enabled terminal, your card will create a unique transaction code that only works once.
“Then if a bad guy hacks into the retailer’s database, steals that code and tries to use it to purchase something else, it won’t work,” Schulz says. “It’s akin to stealing an expired password.”
This is also a significant improvement for merchants. “It means they’ll be storing less valuable information related to your credit card in the future,” Schulz says. In the wake of credit card information breaches at retailers like Target, Home Depot and Michaels, that’s no small thing.
Unfortunately, the changeover has been slow going. The upgrades to credit card terminals are expensive, making it tough for small businesses to make the switch. Some mom-and-pop operations are more willing to risk being liable for potential credit card fraud than to rush to upgrade their machines.
And while these chip cards are an important step in credit card security for in-person purchases, they don’t make much difference for web shopping, since you're still using the number on the card for that. “That’s really one of the big failings of these cards, is that they don’t address a big problem like online fraud,” Schulz says.
If you haven’t received a chip card from your credit card company yet, don’t fret—it’s probably on its way. And the magnetic stripe card will still work in the meantime. Most consumers will probably get their new chip cards by the end of the year.
“If somebody is eager to get a new chip card for whatever reason, the best thing for them to do is call their credit card issuer and ask what their plan is,” Schulz says. “Or you can go to CreditCards.com or a site like ours and find a card that comes with an EMV chip. If you’re interested in getting one and don’t want to wait, that’s an option as well."
