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.
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?