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FAQ: What you need to know about chip-embedded credit cards

Matt Hamblen | Aug. 13, 2015
Facing an Oct. 1 deadline, many U.S. merchants are taking steps to prepare for new, more secure, credit and debit cards.

emv chip and pin
A credit card with EMV (for Europay, MasterCard and Visa) chip security. Credit: Shutterstock

Banks have been sending millions of Americans credit and debit cards equipped with computer chips to improve the security of in-store purchases.

Meanwhile, banks and credit card companies are pushing merchants to upgrade their payment terminals so they can read the chips on the cards and bring the U.S. in line with credit card security used in much of the rest of the world.

The conversion process from older magnetic stripe cards to chip cards has sped up in recent months because of an October 1 deadline. That's the day when liability for credit card fraud will shift from banks to merchants or the party using the least-secure technology. Credit card users, who won't bear liability for fraud, are unlikely to notice the deadline at all.

However, card users might want to know what's happening so they'll be ready when lines form at checkout lanes this holiday shopping season because merchants will have begun deploying chip-card readers. Some industry analysts say chaos will ensue because chip cards take a few seconds longer to read than magnetic stripe cards, and some customers and store clerks will be unfamiliar with how to use them.

The following is information you can share with other shoppers (after October 1) if you happen to be (patiently) waiting in line at the checkout counter.

What's a chip card?
A chip card, also called a smart card, is a credit or debit card with a computer chip embedded in the face of the card. That's the only difference in its appearance. Nearly all of the chip cards that banks are sending their customers still have magnetic stripes that will be used by stores that don't have chip-card readers. Magnetic stripe technology is decades old and is still widely used in the U.S. even though it is relatively easy to hack.

According to industry estimates, about half of the 12 million card readers at payment terminals in the U.S. will be converted to support chip cards by the end of 2015. Meanwhile, there are about 1.2 billion debit and credit cards in circulation among the 335 million people who live in the U.S. Eight major banks account for half of the U.S. card volume; they estimate that nearly two-thirds of their cards will be reissued as chip cards by the end of the year.

There are 3.4 billion chip cards in use worldwide, primarily in 80 countries, according to the EMV Connection website. EMV stands for Europay, MasterCard and Visa, the companies that originally developed chip cards.

 

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