Getting Down to Business – When the Chips Are Down

Credit Card Chips

Credit Card Chips

My replacement credit card with the new “EMV chip” arrived this weekend.

The new cards have small metallic rectangles on the front left hand side, above the card numbers.  This is a computer chip that stores the same information as the magnetic strip on the back – name, card number, expiration date, zip code.

The chip is more secure than the stripe, making it more difficult to steal your personal data.  The data contained in the magnetic stripe is static.  If the information is copied or stolen, it can be used to make unauthorized purchases.  The “credit card skimming device” recently discovered in a gas pump in River Forest is meant to do just that:  copy the information for fraudulent purposes.

The chip gets around that by creating a unique code for every transaction.  Even if the information is illegally copied, the transaction code ensures that the card data cannot be used again without the card being present.

How will this impact consumers?  Instead of swiping your card, expect to insert the card into new card readers.  This is called “card-dipping.” Authorization will take a little bit longer than when you swipe the card.  But, your data is more secure.  Eventually, the stripes will go away.

How will this impact merchants?  Businesses that accept physical credit cards must upgrade card machines to read the chips.  Merchants already are expected to have the technology in place so that chip-enabled cards can be inserted rather than swiped.

If the merchant does not have the appropriate card reader and a fraudulent duplicate of a chip-enabled card is presented, the merchant is liable for the loss.  Previously, the financial institution would have been liable.

New point of sale card readers cost a few hundred dollars and are available from your card processor.  Even mobile Square and Paypal readers must be replaced, though the mobile chip readers are only about $50.

Implementation is lagging, with credit card companies slow to replace cards and merchants slow to replace card readers.  However, the technology is here to stay.  Both consumers and merchants will see changes.


this post also appears on the Wednesday Journal /’s blog community (click here)


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