New Chip and PIN Cards Are About to Make Your Money More Secure
The way you use your debit and credit cards is about to change. Are you ready?
This fall, your trips to the grocery store, shopping mall and movie theater will be a little different when you open your wallet to pay. Instead of swiping your card -- or having the cashier do it for you -- you’ll need to insert your card into a slot and leave it there for a few seconds. Then, instead of signing a receipt, you’ll enter a PIN to authorize the transaction.
Wait, what? Even if it’s a credit card? Yes. Get ready to remember one more PIN.
Your new debit and credit cards will be more fraud-resistant, saving you time on the phone with your bank and saving you money -- because thieves won’t be able to get it out of your account in the first place. But switching to these new cards, called chip-and-PIN or EMV, is a little more complex than you might expect.
How Do Chip and PIN Cards Work?
EMV (Europay, MasterCard, Visa), or chip-and-PIN cards, have an extra layer of security that cards issued in the U.S. haven’t had until very recently. EMV cards have an additional chip in them (you’ll probably see it on the left side of the front of the card) that authorizes the transaction when you enter your PIN. If it’s a credit transaction, you won’t have to sign the a copy of the receipt.
Card readers for EMV transactions look a bit different: They have a slot for inserting the debit or credit card that looks like an ATM card reader. The card stays in the slot as you enter your PIN and complete the transaction.
How Are They Safer?
If you’ve ever been the victim of an ATM skimmer, you know that all a thief needs is the information in the magnetic strip on the back of your card. Next thing you know, they’re copying the info onto a dummy card and running off to buy some cool sneakers or a flight to Thailand.
The chip in your new card is key to battling fraud: Without that chip, the card information can’t be copied.
But you’ll still need to be keeping an eye on your finances by checking your card and bank statements. EMV cards aren’t fraud-proof. “They don’t stop ‘card not present’ fraud, which involves someone stealing your card information and using it for online purchases, for example,” Gerri Detweiler, director of consumer education at Credit.com told CheatSheet. So consumers still need to be careful to monitor account activity, set up alerts, and report possible fraudulent use quickly.”
Where Are My New Cards? What’s This October Deadline I Keep Hearing About?
Some consumers have already received new cards in the mail, or have received a notice to expect a new card soon. But if you haven’t gotten your new cards yet, don’t panic. By the end of 2015, only 70% of credit cards are expected to be replaced, according to a report by Aite Group. Only 41% of debit cards are expected to be replaced by the end of the year.
But here’s where this switchover gets a little confusing.
While chip and PIN cards are the norm in other parts of the world, rising card-based fraud in the U.S. has led the major card-issuing companies (Visa, MasterCard, American Express) to push for an upgrade. In most cases, your bank is the one that returns stolen money to your account after fraud has been committed. And the banks are tired of covering the costs of rising fraud.
As of October 1, 2015, the big banks shift liability for non-EMV fraudulent transactions at the register over to stores. If your card is compromised and used at a retail location that hasn’t upgraded to an EMV reader, the bank may not come to your rescue as quickly -- the retailer will be on the hook.
Two major exceptions: ATMs providers aren’t required to upgrade until October 2016, and gas station terminals aren’t required to meet EMV compliance until October 2017.
So even if you get your new chip and PIN card today, you likely won’t have the full benefits of additional fraud protection until this fall. Big retailers like Target have been working on replacing register equipment for the past year in preparation for the upcoming switch; at some retailers, EMV terminals have been installed, but haven’t been activated yet.
The switchover may be more of a challenge for smaller retailers who will have to foot the bill to upgrade their systems. Square is offering chip readers for free for a limited time to entice their customers to make the switch.
What if you encounter an old-style card reader after October 1? You’ll have to use your best judgement and decide if you’re willing to take the risk. Recouping funds lost due to fraud may be a whole new kind of financial headache after liability switches to non-compliant retailers.
Your Turn: Have you received your EMV cards yet? Have you noticed new card readers set up at your favorite places to shop?
Lisa Rowan is a writer, editor, and podcaster living in Washington, D.C.