The new cards, often called EMV chip cards, feature a small microchip visible on the front of the card. These cards are commonly used overseas in places like Europe, and now they are headed for the United States, partially in response to the large number of data breaches in recent years that have exposed the financial data of millions of consumers. More than 120 million cards have been sent to U.S. households already, and that number is expected to climb to more than 600 million by the end of 2015.
“If we can take fraud out of the system, there is an opportunity for lower costs,” which might translate into new services from your bank, says Randy Vanderhoof, executive director of the Smart Card Alliance.
An Introduction to EMV
EMV cards are named for the three companies that initially adopted them: Europay, MasterCard and Visa. They use an embedded microchip to store their sensitive payment data and make the card harder to copy.
Identity thieves can easily steal (or “skim”) current credit or debit card numbers and other sensitive information from places like gas pumps or ATMs, and then imprint it onto new cards to make fraudulent purchases. Traditional cards use magstripe technology, using the magnetic black strip on the back of your card, which can include significant amounts of a consumer’s sensitive information with only weak security features.
EMV cards are designed to be inserted into a payment terminal vs. being swiped at checkout. Purchases with these cards are authenticated with either a PIN or a consumer’s signature, known as either Chip & PIN or Chip & Signature EMV cards.
Deadline shifts liability for data breach
In the United States, an Oct. 1 deadline was set for this new technology to be adopted, including EMV cards and the payment terminals needed to accept them. Banks are primarily issuing Chip & Signature cards to consumers and Vanderhoof says that “by the end of 2015, it’s expected that about 70 percent of all cards will be EMV cards.”
The Oct. 1 deadline implemented a shift in liability after a data breach, meaning that now when data is stolen, the business with the less secure technology in place will be responsible for paying for any damages. Previously, credit card companies would usually cover the cost of fraudulent charges, but now, if a consumer has a Chip & Signature card exposed because a business used older, less secure technology, the business could be liable for any loss.
During this transition period, consumers will still be able to use their cards with the magstripe.
Effectiveness in stopping fraud
Commonly used in Europe and other countries for decades, these cards have been shown to drop the rate of general credit card fraud, since thieves have a harder time obtaining the sensitive information contained on an EMV card’s microchip.
According to Vanderhoof, using an EMV card can reduce the likelihood of fraud for the lifetime of the card, with the exception of Internet purchases.
“This chip card technology does not protect the card from online or e-commerce purchases,” he says.
When buying online, consumers must still enter their credit card numbers, which can make them vulnerable to cybercriminals. Countries that have adopted EMV credit cards have traditionally seen a sharp rise in this type of fraud. So even with a new EMV card, consumers should keep a close eye on their credit card statements and report any fraudulent charges.
Because many merchants were predicted to not be capable of accepting the insertable cards by the Oct. 1 deadline, the new EMV cards will still feature a magstripe on the back. Consumers may insert their card to pay at one store but swipe it the old-fashioned way at another until more merchants have updated their equipment and technology.
This transition may cause some other minor inconveniences, but Vanderhoof is confident that consumers can adjust and take advantage of the improved security features.
“If consumers are concerned about their security and have not received an EMV chip card, they can contact their financial institution and find out when they can get one,” he says.
Dustin Pellegrini is a senior web producer and writer at Think Glink Media, where he specializes in reporting on identity protection and credit. He studied writing and visual media at Columbia College Chicago.
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