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EMV Chip Cards Coming Soon to Americans' Wallets
March 24, 2015
Over the past few years, data breaches involving major credit cards have
created headaches for millions of Americans and financial institutions. Hackers sometimes use stolen data to make fraudulent purchases, but even if the data is never used, the account usually has to be closed as a precaution. To combat these crimes and increase the safety of transactions, American banks and retailers are beginning to put EMV chips on cards.
EMV chip basics
EMV chips are tiny computer circuits embossed on cards and are used to store and encrypt your account data to protect it during transactions. EMV stands for Europay, MasterCard and Visa, which are the companies that co-developed this technology. It’s been the standard in Europe and other parts of the world for some time, but it’s just now being used in the U.S.
Instead of being swiped, EMV cards are inserted into EMV-enabled terminals. Some EMV cards will also be compatible with contactless technology that lets you tap to pay. However, many EMV cards also have a strip of magnetic tape on the back that contains account information as well, so they still work when swiped at checkout counters.
Why EMV cards are safer
Traditional plastic features a magnetic strip that delivers account data in a clear format when swiped through a card reader. Because it’s not encoded, the information is vulnerable to being stolen. If a thief obtains your account details, he can fairly easily make copies of your card and use it to siphon away your money.
Cards with EMV chips, on the other hand, store your data in the chip in encrypted form and create a unique transaction code for each purchase. If a hacker steals your card and tries to duplicate it, it wouldn’t work. The improved authentication technology used by EMV cards has sharply diminished card fraud in countries where it is standard.
Adopting EMV technology
EMV chips are slowly starting to appear on cards issued in the U.S., and the technology to use them is expected to become widely available at both retailers and financial institutions such as Central Sunbelt Federal Credit Union by the end of the year.
Why the shift? Major card issuers in U.S. set an Oct. 1 deadline after which liability for fraud with a physical card will fall on whoever is least EMV-compliant (not including the consumer). Before that date, retailers aren’t financially responsible if customers’ card data is stolen from them. However, after the new rules kick in, if a merchant isn’t using EMV-compliant terminals and fraud occurs, they will be liable — not the card issuer.
While this change is meant to encourage retailers to get on board with EMV technology, the needed equipment is expensive. As a result, it may take longer for some retailers to install the technology, and your card may still work the old-fashioned way in the meantime.
A warning for travelers
Some EMV credit cards require the use of a personal identification number, or PIN, to authenticate transactions (like many bank debit cards) for added security. This is common in Europe. Many EMV cards being introduced in the U.S. only require a signature, not a PIN, much like cards that hold your data on magnetic tape.
Regardless of whether your EMV card uses a PIN, the chip technology still can increase the security of your transaction. But if you travel abroad and have a chip card without a PIN, you may have some trouble using it. Most merchants abroad can still swipe your card to get the information from the magnetic tape. But this can pose problems for unmanned terminals, like ticket-dispensing machines.
While not all merchants will have EMV systems in place by the end of the year, 2015 is expected to mark a significant shift to this technology in the U.S.