4 Things You Need To Know About The Computer Chip In Your Debit/Credit Card

by Travis Pizel · 9 comments

emv credit card
An error message popped up when I swiped my shiny new debit card through the card reader. The small screen stated I was required to use the chip reader because a chip card had been detected. The card I had recently received in the mail did indeed have a small computer chip embedded in the card, and looking closer at the card reader I saw a previously undetected slot on it’s underside to slide the card into.

With very little fanfare or attention, a significant change occurred recently that affects your debit and credit card transactions, and it has everything to do with the small chip on your card and that extra slot on the card reader.

Why Is There A Chip In My Debit/Credit Card?

EMV, which stands for Europay, MasterCard, and Visa, has been widely used in other places in the world for years. The United States has just been slow to adopt it. The computer chip contains information about your account and the card issuer, and a unique transaction number is generated every time you use the EMV card in a chip reader that is never used again. This is fundamentally different than the traditional magnetic strip technology, as everything on the card is fixed and cannot be altered. For this reason the EMV cards are harder to counterfeit and therefore less susceptible to fraud.

Who’s Liable For Fraudulent Charges?

Who’s liable in the case of fraud currently depends upon the actions of the retailer. The retailer is liable for the cost if the retailer doesn’t ask for identification in the form of a PIN or signature, and the transaction is reported as fraudulent. If any attempt at verification is made, then the liability falls back to the card issuer. Merchants are generally allowed to make up their own policy with regard to requiring a PIN or signature, as the transaction is actually authorized as soon as the card is processed. That’s why at some retailers you aren’t asked for one if the amount owed is low. They reason that if the transaction total is low, the risk of fraud is also low.

Liability Shift

In efforts to push card issuers and retailers to implement EMV technology, a milestone was set for October of 2015. When October arrived, a shift in liability occurred. Who’s liable in the case of a reported fraudulent transaction is no longer based on whether the retailer asked for some sort of authentication, but who is less EMV capable. If a retailer has not implemented EMV technology, but the transaction occurred using an EMV card, the retailer is liable. Vice versa, if a card issuer doesn’t have an EMV chip on their card, but the retailer has EMV readers, then the card issuer eats the cost. In the case of a technological tie, liability would fall with the card issuer.

How Pervasive Is EMV Technology?

In my wallet, my only credit card has a computer chip as does one of two debit cards. An estimated 120 million Americans already have cards with EMV technology. Retailers have been slow to take on the expense of replacing their equipment, but it is becoming more common. While Target is the only retailer that has forced me to use the chip reader, I see increasingly more and more register stations include card chip readers in addition to the traditional card swipe ability.

How many of your cards include computer chips? Have you been forced to use a chip reader?

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  • freebird says:

    I have one of each and haven’t used a chip reader yet. I’ve seen others using it and the delay is noticeably longer than a swipe.

    I didn’t realize the chips in our credit cards are written as well as read, I had assumed they worked like those RSA keyfobs that only generate codes periodically. The writing capability probably upped the terminal cost and the rollout delay.

    I guess next step is embedding an RFID so we don’t have to even pull the card from our wallet to check out!

    • David Ning says:

      They first tested out chip cards in the 70s in the United States, so I would hold your breath on them moving to another new technology like RFID 🙂 You never know though!

  • Chuck says:

    All of my cards are updated as of last week except for the new HSA cards that just arrived. I would expect they will eventually be replaced as well considering they are Visa.

    It’s definitely a step in the right direction.

    • David Ning says:

      I’m sure they’ll switch soon. Part of the hangup of switching was that none of the banks wanted to pay to replace all the credit cards to chip cards since they costed more. With pretty much everybody moving to EMV, the cards should also come down in price.

  • Raj says:

    We in India are using thesr cards from.last few years, for EMV bases cards PIN is mandatory for offline transactions and for online transaction one time password sent by SMS is required.

    • Chuck says:

      Ah, an SMS pin is a good idea. Hopefully we see more online retailers start to require this. Two-factor should also be mandatory for banking/financial logins but unfortunately it’s not.

  • Money Beagle says:

    Interesting timing. I just had a fraud situation yesterday where one of my cards was swiped at a few locations and charges made, except that the actual card was snugly in my wallet. From what I’m reading, duplicating my card onto another one would not have been possible had I had a chip card.

    • I believe – at the moment – the EMV technology is ahead of any counterfeiting technology. Which is exactly why most of the other developed nations have moved to it. Hopefully it doesn’t take too much of your effort to get your charges reversed!

    • Chuck says:

      At this point, creating a dupe is almost impossible (extremely difficult and requiring very specialized tools). However, it’s still possible to use the card number and CVV code for online transactions.

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