Chipped Cards: What You Need to Know
Categories: Information Security
As of October 1st, retailers are supposed to be switching to card readers for EMV1 chip secured cards, moving away from the ubiquitous card swipe stations. Banks and credit card companies have been sending the new cards, which contain a computer chip as well as the standard magnetic stripe, to their consumers for some time. Now, however, if a retailer has not upgraded their credit card systems, they will be liable for any card fraud that uses a chip-equipped Discover, Mastercard or Visa card. American Express will begin holding business owners liable on October 16th.
1) Does this mean my regular card won’t work anymore?
No. The regular magnetic-stripe cards will continue to be usable for the next few years. Expect your bank and credit card providers to supply you with the new cards as they send replacements.
2) How is buying something with the new cards different from the old?
Instead of swiping your chip-equipped card, you will actually insert it into the card reader and leave it there for the duration of the transaction. This may add a little time to each transaction; retailers hope it will be small enough to not disrupt things too much.
3) What if I have a chipped card, but the store doesn’t have one of the new readers?
The new cards are all being issued with both chips and stripes, so they can be used at the older terminals. After the transition period, the stripe will be phased out.
4) Will this actually prevent credit card fraud?
It should help a great deal. The UK experienced a 63% decrease in card fraud2 – although it took three years. Until the majority of consumers are using the new cards, there are still many opportunities for criminals to continue cloning old cards. It also (currently) does not prevent online fraud. In fact, online fraud may become more common for a while. Check your credit card statements closely for the next few years3.
5) How does this work?
In a magnetic-stripe card, all of the account information needed for transactions is recorded in the strip; if someone reads that data (with a card reader, like the ones used to process payments) they can then create a copy of that card. As long as the original card remains valid, the duplicate will also be accepted. The new cards use a computer chip to generate a single-use code for each transaction. Since cloning the chip is much more difficult and would require having possession of the card for a long period of time, cloning cards becomes almost impossible. In Europe, the system also requires a PIN for purchases; while this will eventually be used here, issuers are wary of requiring too many changes at once for their users4.
1 ^EMV is an acronym derived from Europay, Mastercard & Visa
2 ^ ABC News, “What You Should Know About the New Credit Card Chip Rule” (http://abcnews.go.com/Business/credit-card-chip-rule/story?id=34148839), accessed 1 Oct 2015.
3 ^ NBC News, “Chips, Dips and Tips: 5 Potential Problems With New Credit Cards”, (http://www.nbcnews.com/business/consumer/chips-dips-tips-5-potential-problems-new-credit-cards-n436511), accessed 1 Oct 2015
4 ^ How-To Geek, “Chip Credit Cards Are Coming to the USA: Here’s What You Need to Know”, (http://www.howtogeek.com/216571/chip-credit-cards-are-coming-to-the-usa-heres-what-you-need-to-know/), accessed 1 Oct 2015.