If you have a credit or debit card, you’ve probably noticed that your bank has sent you a new card sooner than expected. You’ve also probably noticed that the card, fitted with a small chip on its face, looks slightly different than your old plastic.
What’s the chip for?
This year, financial institutions all over the country have been replacing old credit cards with newer, safer cards embedded with EMV chip technology that make it more difficult for crooks to access your financial data.
Smart Card Alliance predicts that by the end of 2016, 600 million Americans will have EMV credit cards.
Here’s everything you need to know about using your EMV card and how the chip-based technology will keep your financial information more secure.
1. They’re making it more difficult for criminals to duplicate your card
Credit card fraud is on the rise, especially in the U.S. According to the August 2013 issue of the Nilson Report, nearly half of the world’s credit card fraud occurs in the U.S., even though the country handles approximately one quarter of the world’s credit card transactions. Furthermore, 42% of Americans said in 2012 that they’d experienced some form of card fraud in the past five years, an ACI Worldwide report revealed.
Part of the reason that card fraud has spiraled out of control is because the magnetic stripes on the back of traditional credit cards are easy to steal card information from or duplicate. In fact, for around $100, thieves can purchase a machine that “skims” the information from a magnetic stripe and implants it onto a new, blank card.
EMV technology, which stands for Europay, MasterCard and Visa, works differently. In use in Europe for more than a decade, EMV microprocessor chips are embedded onto the front of your credit card. Traditional skimming devices won’t work on these chips, and they’re very difficult (and expensive) to clone.
2. EMV also keeps your information safe once you’ve paid
During a transaction, the EMV chip passes a one-time code to the machine that is useless to criminals. Thieves can’t use the code to create a duplicate chip card or use the code to transact.
Instead, it produces a single-use code to validate the transaction. If a thief were to steal the one-time code, it wouldn’t be able to use that code to shop and couldn’t use the code to create a counterfeit card.
3. A longer transaction won’t necessarily be a bad thing
Instead of the typical credit card swipe, EMV readers employ a dipping method in which consumers place their card into a terminal that reads it and verifies it with a bank. Though this vetting process takes longer than a simple swipe, it creates a more secure transaction.
What if you get an error message? That’s nothing to be concerned about. For instance, if you swipe your EMV card on an activated EMV terminal, the machine will display an error note and ask you to insert the new card. If you insert it on a non-activated EMV reader, the point-of-sale system will ask you to swipe the card instead.
Additionally, EMV cards contain one of two verification methods: pin or signature. More widespread in the U.S. right now, the signature method asks shoppers to sign a sheet of paper or a screen to verify that they’re the cardholder making the transaction. Many EMV cards will continue to contain a magnetic stripe, but this technology will be phased out as more EMV cards and readers are distributed.
4. Fraud liability structures won’t change for consumers
No credit card is perfect.
Even as credit card providers introduce safer technologies, fraud will still occur if there’s money to be made. EMV cards are no exception.
Starting this October, though, credit card networks like Visa and Mastercard are changing their policies regarding which party pays if fraud occurs. In the past, banks or processors would pick up the tab if your card was copied or used illicitly. Soon, however, the responsibility will shift to the least compliant party in the transaction.
So, for example, if someone buys a new laptop with a stolen credit card at a store that does not accept chip cards, that merchant will be on the hook. Conversely, if the store has an EMV processing system but the bank has not embedded the chips into its card, the bank is responsible for the fraudulent charges. If both are compliant, the issuer will cover the cost.
5. October won’t change everything
While liability costs will change in October, the EMV migration will likely be a years-long process. Even though merchants are induced by the new liability structure to implement EMV point-of-sale machines, they likely won’t all immediately do so.
Consumers need not worry that their stripe cards will be obsolete by October if they’ve yet to be replaced. New point-of-sale systems will feature traditional stripe readers and EMV chip processors, and the first wave of new chip cards will also have stripes.
6. Remember to activate your card and update your information
When you receive your new card in the mail, you’ll need to follow a few quick steps to get your payments up and running. First, follow the activation instructions that you receive with the card.
Next, remember to update your stored information with online and brick-and-mortar merchants. With Amazon, for instance, you’ll need to input your new card number, security code and expiration date. If you have recurring payments set up, make sure to notify those merchants that your information has changed.