Everything You Need to Know about New Chip Enabled Credit Cards

Everything You Need to Know about New Chip Enabled Credit Cards

As of October 1, 2015 merchants across the nation were no longer able to accept run of the mill credit cards. As of October 8th, 2015 in fact, any credit card without a chip will be rendered useless. The purpose of this change is to reduce the instances of fraud – and although this change will not have a huge visible impact, it will definitely affect small businesses across the country. 

The new chip cards require EMV technology in order to be able to process payments, the chip essentially makes in-person fraud more difficult to get away with by providing a one-time use number to the merchant, instead of the card number itself.

What This Means for Merchants:

Credit card companies will no longer assume risk when it comes to credit card fraudulent transaction that do not use the new chip technology. However, if a card with a chip is swiped using the magnetic strip instead, the business will be liable – not the consumer and not the credit card company.

Because not all banks are issuing new cards immediately, most are waiting until current cards expire, this will cause some confusing in the transition time. It is estimated that not until 2017 will all credit cards be converted to the new chip technology. But, good news for merchants, if a bank does not issue a new chip card, and the card is used fraudulently – the bank will be responsible for the refunding the lost funds. This transition will be high cost and timely for both banks and merchants.

Important Points:

Many businesses will need to buy new card readers – any credit card machine purchased over five years ago, will likely not have the software to read the chip cards. If new card readers are not purchased, the business will be deemed responsible for any fraudulent uses of cards at their business. The new software and machine costs range from $500 to $10,000 – and even businesses that use Square will have to update their devices. Employees will also need to be trained on how to handle the new systems, costing many employers valuable time.

Consumers will not be directly affected by this change, other than their physical card change. Charge backs will leave businesses liable.

Takeaways:

· EMV/chip cards will essentially make it more difficult for criminals to steals credit card information at a point of sale – consumers are still at risk when doing online purchases.

· Consumer fraud liability is not changing – just business’. Retailers who do not update their software systems with EMV/chip-enabled equipment will be held responsible for those losses, rather than the credit card companies.

 

· The new cards will also have magnetic strips on the back of them – they will act as a failsafe in case a store you use has not upgraded or a chip is malfunctioning.

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