New Chip-Enabled Credit and Debit Cards: What Do They Mean for You?

Now that an October 1, 2015 deadline has passed, many credit and debit card issuers are replacing older magnetic stripe credit and debit cards with new chip-enabled cards. Likewise, some retailers are updating point-of-sale card readers at their cash registers to accept these chip-enabled cards.

What are chip cards?

Chip cards are another name for EMV (Europay, MasterCard and Visa) cards, which use a global standard for authenticating card transactions. EMV cards are “smart” cards that have a chip embedded into the card. Unlike traditional credit cards, EMV cards need not rely upon the magnetic stripe on the back of the card. EMV cards provide greater security than traditional cards and have been the standard in Europe for years. The chip (a small, metallic square you'll see on the front of the card) stores the same basic information as the magnetic stripe on your card. The chip also contains additional security components not found on the magnetic stripe. Every time a chip card is used for payment, the chip creates a unique transaction code that cannot be used again. You will still have a magnetic stripe on the back so that you can use your card at merchants who don’t accept chip cards yet.

What happened on October 1, 2015?

Liability for fraudulent transactions now falls upon the company that is using the less secure technology. For example, if your bank has issued you a chip card, and a store has not upgraded to a chip-enabled reader, the store would be liable for the cost of any fraudulent transactions. On the other hand, if your bank has not issued you a chip card, but the store has upgraded its reader, your bank would be liable for fraudulent transactions. (The deadline for pay at the pump fuel purchases will be extended until October 2017.)

When will I receive my new chip-enabled card?

Most large banks and other financial institutions mailed new chip cards to their customers earlier this year. However, some smaller banks and credit unions have not yet sent them out.

How does this affect my liability for fraudulent credit or debit card transactions?

Nothing has changed. Your maximum liability for unauthorized use of your credit card is $50. However, if you report the loss before your credit card is used, you are not responsible for any charges you didn’t authorize. If your credit card number (but not the card) is stolen, you are not liable for unauthorized use. Your liability for unauthorized use of a debit card depends on how quickly you report it. Potentially, you could lose all of the money in your account.

Does the chip invade my privacy?

No. Location tracking capability is not stored on the chip. Standard chip cards do not utilize Radio Frequency Identification (RFID) technology. RFID is only used in contactless credit cards. Contactless cards can be waved in front of a merchant’s special reader. They do not make contact with the reader. These contactless cards include Visa payWave, MasterCard PayPass, and American ExpressPay. Most cards do not include contactless features.

How do I use my chip-enabled card in a retail store?

In order to use a chip card, you must insert or "dip" the card into a slot in a store’s payment terminal. You do not "swipe" the magnetic stripe on the card. The chip card must remain in the terminal while the transaction is processed. Approval of the transaction will take a bit longer than with older cards. Don’t forget to remove your card from the slot when the transaction is completed! As stores transition to chip enabled terminals, if you try to swipe your chip card as you normally do, the terminal will prompt you to insert it in the slot instead. If you already know your chip card works in a store, start by inserting your card instead of swiping. Unfortunately, it may not always be clear whether a store has upgraded to chip technology.

Will I need to use a PIN with my chip-enabled card?

Most U.S. chip cards will be "chip and signature" rather than the European "chip and PIN" cards. Instead of entering a PIN on a machine to verify your purchase, you may be asked to sign a receipt just as you now do for swiped credit cards.

Are "chip and signature" cards less secure than “chip and PIN" cards?

Yes. "Chip and signature" cards can help protect your card from “skimming” or “card cloning” where thieves use a device to steal your card information during a legitimate transaction. However, they do not protect you if you lose your card. “Chip and PIN" cards have the advantage of also helping to protect you from lost card fraud. Neither "chip and signature" nor “chip and PIN" cards can help protect you from fraudulent online and telephone (card not present) transactions.

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