Do you have a payment card with a chip on it? You should, as banks and merchants are under pressure from the payment card networks (Visa, MasterCard) to get consumers to use chip-enabled cards by October 1.
The chips – little gold microprocessors that are built into the card (see picture) – make payment cards more secure, but consumers will have to adapt in order to use them.
To make this transition easier, here’s what you need to know about chip cards:
The chip is a security feature
Chips make payment cards more secure by creating a dynamic authentication process. Each time a chip card is read at the point of sale the chip generates a unique code that verifies that the card is real. Payment cards with chips cannot be duplicated by counterfeiters.
Fun fact: The chips are “more powerful than a 1984 IBM PC AT desktop computer” according to digital security company Gemalto.
The way you use your card at the checkout will change
- For consumers, there are no more swipes!
- Chip cards are read by being “dipped” into chip enabled readers.
- The card must remain in the reader until the transaction is complete – 5 to 10 seconds.
- Take your card out of the reader once the transaction is done! Merchants in countries that already use smart cards collected a lot of cards left behind by distracted customers.
The October 1 deadline refers to the party on the hook for counterfeit card fraud (spoiler alert: it’s not consumers*)
Under rules put forth by the payment networks, tomorrow, October 1, 2015, is the deadline for banks and merchants to upgrade to new accommodate transactions with chip-enabled cards. After today, the party supplying the lesser secure element of a transaction – card (issuing bank) or point of sale terminal (merchant) – will bear the cost of any fraud due to the use of counterfeit cards.
*Consumers aren’t on the hook directly for purchases made by fraudsters with their cards, but ultimately we all pay for fraud because its costs are diffused through the system
Not so fun fact: research indicates that the system – issuing banks, merchants, consumers – are not going to be ready by tomorrow. That could mean headaches ahead.
We’re glad that consumers are getting more secure cards, but we’re disappointed that not all EMV cards require a PIN (personal identification number) in order to use them. A PIN makes a chip card more secure, but instead the banks and payment networks pushed for cards that only require a signature. (We’re giving merchants a pass because they have consistently supported the use of PINs.)
What do you think of the new chip cards? Tell us about it in the comments.
For more on chip cards, including how to use them, see this Visa infographic: