While the United States is generally considered to be a world leader in technology, we’ve been falling behind in one critical area, and that’s credit card security. For several years, European banks have been issuing credit cards that feature a chip as as well as the traditional magnetic stripe. This feature has enhanced security and is generally preferred by most merchants and consumers.
Unfortunately, credit card companies and banks in the United States have been late to the chip party. It’s just been within the last 18 months that our banks have begun issuing these cards, and the first lucky recipients were those customers who traveled internationally. Over the year as cards expired, customers began receiving their new cards with the chip.
As of October 1, all merchants were ordered to have machines capable of reading chip-enabled cards. All U.S. credit card companies and banks are making the switch it’s likely you’ll be getting your new chipped card soon, if you haven’t already. Here’s what you need to know about your new card and how it works for you.
1. What Is the EMV Chip?
EMV stands for EuroPay, MasterCard, and Visa after the companies that banded together to create the new technology. The chip differs from the magnetic stripe in many ways, but the most important of these is the fact that the chip creates unique identifying information each time the card is used. The stripe presents the same information each time which makes it more attractive to thieves.
2. How Is a Chip-Enabled Card More Secure?
As stated above, the EMV chip is inherently more secure because your unique credit card data is no longer stored in the magnetic stripe. The chip generates a unique identifier for each transaction which dramatically lowers the risk of compromised data. In addition, chips are much harder for thieves to create, whereas duplicating a magnetic stripe is much easier.
In Europe most points of sale also require a PIN, but that won’t be happening in the United States anytime soon. U.S. retailers will still require a signature.
3. How Will This Affect U.S. Retailers?
Some major US retailers already have the technology in place to accept EMV cards at their points of sale. Unfortunately, it may take some time for smaller businesses to implement the necessary technology. Despite the fact the United States government implemented changes on October 1, 2015 regarding the new chipped cards, many retailers are lagging. Those businesses that have not yet switched over are liable if they suffer a data breach instead of the bank.
Fortunately for most American consumers the new EMV cards will still have a magnetic stripe so you can use them even if your favorite retailer has not yet made the upgrade.
4. How Can I Tip on an EMV Card?
One of the biggest changes that US customers might notice is how the new cards change the way we leave a tip for services. Prior to the change a customer’s card would be charged for the amount of the service, and the tip is processed later as a separate transaction. This will no longer be possible with the new cards.
Fortunately many restaurants now use handheld POS systems that your server brings to your table. You are then able to add the tip to the bill in one transaction. Cards with the Visa logo will also allow you to automatically add 20 percent. If you want to leave more or if your card doesn’t offer this feature it’s best to leave cash.
5. How Will My Card Work Internationally?
Some countries in Europe and the United Kingdom have been using EMV technology for almost 10 years and have seen cases of credit card fraud drop dramatically. The combination of the chip and the PIN seem to have reduced fraud, but not eliminated it.
Unfortunately, since the United States is not adopting the PIN feature and is using the chip and signature combination this has some European banks and retailers worried. However, it’s likely that most European retailers will accept the American cards, although they might not be very happy about it.
In many cases people are wary of change, but the new EMV cards are a very good thing, especially as it relates to the security of your credit card transactions. While the United States still hasn’t quite caught up to Europe in terms of credit card security, the new cards and rules for retailers are definitely a step in the right direction.