Using a credit card is one of the safest and most convenient ways to pay for products and services. Not only do most credit purchases come with zero fraud liability, but using one can save you from carrying around an easily-stolen wad of cash and allow you to keep track of every cent you spend.
But those benefits are about to be taken up a notch come Oct. 1. With the nationwide rollout of EMV technology taking place, credit cards will soon offer a broader range of safety precautions – plus other benefits. Here, we answer some common questions about the switch.
What Is EMV Technology?
You’re probably wondering what all of this means. In short, merchants in the U.S. are adopting EMV technology – which takes its name from “Europay, MasterCard, and Visa” – in order to make all of our credit transactions safer.
According Jon Krauss, senior manager of credit product management at Discover, the new chip cards and the technology they possess add an extra layer of protection against fraud on point-of-sale purchases, specifically.
But, how does it work? Krauss explains, “The microchip in chip cards generates unique, dynamic data every time a consumer completes a transaction, making it harder for fraudsters to collect their card information. In turn, it is more difficult for hackers to copy and use credit card information.”
According to Smart Card Alliance, 80 different countries are in various stages of adopting this technology. And in some countries, EMV is used almost exclusively. For example, 99.9% of terminals in Europe are chip-enabled, and so are 84.7% of terminals in Canada, Latin America, and the Caribbean.
What Changes Can I Expect?
If you already have a credit card that offers this technology, the main detail to be aware of is that you’ll stop swiping your card like you normally would at retailers who have embraced the technology. Instead, you’ll stick your card into the EMV terminal slot so it can read the chip.
But if you don’t have a chip-enabled card, or the retailer hasn’t adopted this technology yet, you don’t have to sweat it. When that’s the case, use the magnetic stripe on your card as you have done in the past.
According to Krauss, a significant portion of the merchant community should be using EMV technology by Oct. 1 – but not everyone will be on board. It really depends on the merchant and how quickly they plan to adopt. Further, some industries are lagging behind in terms of making these changes.
“Gas stations, for example, are on a different timeline than most merchants,” noted Krauss.
Do I Need a New Credit Card?
As Smart Card Alliance notes, an estimated 120 million chip cards had been issued in the U.S. by the end of 2014. And by the end of 2015, that figure should be at around 600 million.
Most major card issuers have led the charge by adding this technology to their existing credit card products and supplying new cards to their current customers. In the near future, you can expect more card issuers to begin this process.
Discover, for example, expects the majority of their product portfolio to be migrated by the end of the year. According to Krauss, consumers who don’t have their new chip-enabled card yet can call their card issuer and ask for one. Further, some new cards being issued have both the magnetic stripe and the chip technology, including Discover products. So don’t stress if you find your “new card” has both.
“By having both methods,” says Krauss, consumers will “be ready as the U.S. fully transitions to chip technology.”
Consumers who want a card with better benefits can also use this opportunity to shop around. Many of the best travel cards and rewards credit cards already have this technology, plus a slew of other benefits.
Do I Have to Get a Card with EMV Technology?
If you’re hesitant about getting a new card, the decision will probably be made for you. A wave of new incentives and penalties have been put in place to propel both banks and merchants to adopt EMV – or else.
For example, the liability for credit card fraud will fall squarely on the party without EMV technology come Oct. 1 In other words, when credit card fraud takes place, whoever is the least compliant in terms of EMV technology — whether it’s the card issuer or the retailer — will have to take the hit.
In the event of a huge data breach, that kind of liability could lead to a nearly endless stream of unnecessary losses. And that’s part of the reason both merchants and card issuers have been so quick to make these changes; nobody wants to pay for fraud if they can prevent it.
Further, the magnetic strip cards we have all become accustomed to won’t be usable forever. As EMV technology takes hold, expect the old cards to go the way of the dinosaur. The technology is so prevalent in places like Europe, swipe cards have already died there. In fact, many overseas travelers are shocked to find their traditional credit cards won’t work with some overseas merchants at all.
Will EMV Technology Make All of My Transactions Safer?
Yes and no. The most important thing to remember is that, while EMV makes point of sale transactions immeasurably more secure, it does nothing for online purchases. Not only will you make your online purchases in the same way you always have – by entering your account information online – but you’ll also gain no tangible benefits for doing so, even if you get an upgraded, chip-enabled card.
In a world where online security is a real concern, this is truly unfortunate. However, it’s important to note that almost all credit cards offer zero fraud liability for all purchases, including those made online. And even government standards set by the Fair Credit Billing Act (FCBA) limit consumer liability for credit card purchases to just $50. So, that’s the most you could legally be on the hook for regardless.
What Will the Transition Be Like?
While the new technology is certainly a win for consumers, it won’t be perfect. You should expect a few frustrations as checkout clerks and customers alike acclimate themselves to the new process and the new cards.
“Consumers will have to have some patience because their experience at the point of sale will be different,” noted Krauss. For example, you might see longer lines and a little more confusion at the checkout in the short-term. Eventually though, everyone will get used to it.
Fortunately, all the stress and confusion should ultimately be worth it. Countries that have already introduced this technology are seeing massive drops in the amount of fraud perpetrated each year.
For example, losses on point-of-sale transactions in the U.K. have fallen by 67% since 2004, while lost and stolen card fraud fell 59% and mail non-receipt fraud fell 91%.
Unfortunately, increasing protections on the point-of-sale end could mean more incidents of fraud in the online world, notes Smart Card Alliance. This “fraud migration” is an unfortunate result of making certain transactions more secure. It’s inevitable that, as security tightens on one side, those who perpetrate these fraudulent acts search for easier targets elsewhere.
Thanks to the new technology, some credit card transactions in the U.S. are about to get a whole lot safer. Even better, you won’t have to do anything to enjoy these new benefits. Just sit back, relax, and wait for your new card to arrive in the mail. Or, search for a better card that is already on the EMV bandwagon. Either way, we’ll all enjoy better security for card-present transactions in the U.S. from this point forward.