NEW YORK – Credit cards in most Americans’ wallets are pretty much antiques. They’re easy to counterfeit, thanks to magnetic strips that rely on basically the same 1960s technology used in cassette tapes.
At last they’re getting an upgrade with EMV chips, used almost everywhere else in the world. The first day of October is an important date in making that happen. Some questions and answers:
Q: What’s an EMV chip?
A: It is a small computer chip in the credit card that lets the card and the card reader engage in a digital conversation to authenticate the transaction. EMV chips (after Europay, MasterCard and Visa, which created the standard) can’t be copied and counterfeited the way a magnetic strip can.
Q: What happens Thursday?
A: Card issuers and retailers are gradually switching to EMV. October marks a shift in liability for fraud that is designed to prod retailers to move faster. Usually card issuers are responsible for the costs of credit card fraud. After Oct. 1, retailers that haven’t upgraded to EMV point-of- sale terminals will be liable for fraud at their stores. Card issuers are still liable for fraud on cards that don’t have it.
Q: If I don’t have a chip in my card, is that bad?
A: Not for you. Someone else, either the card issuer or the retailer, will still be liable for fraud that happens on your account. And you’ve got plenty of company. By the end of the year, only about 36 percent of Americans’ credit cards will have EMV chips, Javelin Strategy and Research estimates. That should jump to 67 percent by the end of 2017. Debit cards are even further behind: Just 13 percent will have EMV chips by the end of the year.
One advantage of EMV is it makes it easier to make purchases while traveling outside the country. The Smart Card Alliance says almost 80 percent of checkout terminals in Canada, Latin America and the Caribbean read EMV cards. In parts of Europe, 95 percent of terminals have EMV.
Q: How different is the checkout process with EMV cards?
A: “For consumers, there is going to be a bit of confusion,” said Michael Moeser, director of payments at Javelin. Shoppers are used to swiping cards quickly and putting them back in their wallets. With EMV cards, they must wait to insert the card in a reader until after the cashier is done, then leave the card there for several seconds while the chip and the network communicate.
Q: What might go wrong?
A: Expect longer lines, especially as people get used to the new procedures. Distracted customers may walk away with their cards still in the EMV reader, then rush back in a panic to fetch them. Even after clerks and customers learn how to handle the new cards, transactions will probably take longer. Shoppers will need to pause for a moment as card complete their interaction with the network.
Q: How do I know if a retailer is ready to read my EMV card?
A: You don’t. Most large retailers have already upgraded or will do so soon. But many small retailers and restaurants are still figuring out what to do. If you’re not sure, “it’s always safe to swipe first,” said Jamie Topolski, the director of alternative payment strategies at financial technology company Fiserv. If you have an upgraded card, you might then be told to insert it into the EMV reader. (You won’t be charged twice, experts say.)
Even if you spot an EMV reader on the checkout counter, it may not be turned on yet. That’s because retailers often need to upgrade not just their equipment but their software too. For the same reason, Topolski warns that retailers that convert to EMV might not initially be able to offer cash back on debit cards as they used to do.
Q: Will this kill credit card fraud?
A: EMV chips do make it almost impossible to counterfeit your credit card. But they don’t prevent fraud in online transactions. Expect fraudsters to migrate online or focus on shops that still can’t read EMV cards.