Ready or not: Effects of chip credit cards’ arrival

The chip generates a unique, one-time code that is hard to counterfeit but is needed for each transaction to be approved. From a business and consumer standpoint, it makes most sense for card issuers to enable PINs on their cards and services because PIN is the global standard.

The United States is the last major market still using the traditional swipe-and-sign system for credit card transactions, which is a problem considering that nearly half of the world’s credit card frauds happens in American territory, with huge situations like the recent Target credit card data theft. This works the other way around, as well: if the merchant has a new terminal but the bank has not issued the client a chip and pin card, the bank will be held responsible in the case of fraud. However, the mandate does not specify whether the card be further verified by a PIN number or customer signature, and the Retail Industry Leaders Association (RILA) has a clear preference.

If you’ve received a replacement for your credit or debit cards in the mail lately, take a closer look.

But there is some conflict between financial institutions and advocacy and trade groups about whether the new cards will be “ready to go” by an industry mandated October 1, 2015 deadline. Current estimates show that 47 percent of US terminals will be able to read chip cards by the end of the year.

Beginning October 1, retailers are taking steps at the checkout counter to better protect them and their customers from credit card fraud.

For merchants, processing chip transactions will likely involve a hardware or software upgrade somewhat similar to upgrading a cellphone contract. Unfortunately, those new cards are not as secure as they could be and should be. RILA members include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales, millions of American jobs and more than 100,000 stores, manufacturing facilities and distribution centers domestically and overseas.

If EMV card terminals were in place during the hack, the information that the hackers were able to steal would have been pretty useless, because there isn’t any information that allows them to duplicate the card.

If you travel overseas regularly, you’ve probably already seen chip card technology in action.

While chip cards may help prevent the use of counterfeit credit cards for in-person transactions, it does nothing to prevent fraud in the event of a lost or stolen card. At these new terminals, you would insert the top part of the card with the chip into the reader instead of swiping or dipping the magnetic stripe. However, consumers will still need to keep their cards safe and confirm the accuracy of all their spending data.