Cash-advance PIN on an EMV card doesn't make it 'chip-and-PIN'
By Tony Mecia
Dear Cashing In,
I read your recent article on the switch to EMV cards, but one thing doesn’t make sense to me. I thought that if I got an American Express or Chase credit card with a new chip, and then got a PIN for that EMV-chipped card, then I would have the equivalent of a chip-and-PIN card. Is that not accurate? -- Bob
There is a fair amount of confusion around the rollout of these new chip credit cards, which are starting to make their way into consumers' wallets ahead of a deadline toward the end of 2015. A lot of reward credit cards have been among the first to introduce the new chips, which will eventually replace the magnetic stripes that people now swipe to use their cards.
In short, your confusion arises because there are two types of PINs associated with credit cards -- the PIN needed to complete a purchase at a chip-and-PIN terminal, and the PIN we have with most credit cards in the U.S. that allows you to get a cash advance at an ATM.
This can get complicated, so let's take a little bit of time and talk about the specifics of these different technologies and what they mean for cardholders.
The magnetic stripe technology on the back of cards dates to the 1970s. For the first time, it allowed merchants to verify credit easily and instantly. The problem, though, is that magnetic stripe cards are relatively easy to counterfeit and use fraudulently.
Issuers are now coming out with cards with EMV chips, and merchants are buying card readers that are compatible with EMV-chip cards. This is happening now because in October 2015, the rules for who pays for fraud are set to change. Banks and merchants do not want to be liable for fraud losses, so they are moving to the more secure EMV technology.
EMV is more secure because the information on the chip is difficult for a fraudster to replicate. The Smart Card Alliance, an industry group, says: "It is virtually impossible to create a counterfeit EMV card that can be used to conduct an EMV payment transaction successfully."
With that background, Bob, let's turn to your question.
When an EMV card is issued, the issuer selects what is known as the cardholder verification method, or CVM, which is either a PIN or a signature. (It can also be configured for no verification method.) Transactions with PINs cut down on fraud from cards being lost or stolen, and the combination of chip and PIN are a common verification method in many other countries.
However, most U.S. card issuers are electing to go with EMV cards that are verified with only a signature ("chip-and-signature"), because they worry that forcing consumers to remember PINs will make the cards harder to use, and therefore consumers will use PIN cards less. A much smaller number of U.S. issuers are sending out EMV cards with both signature and PIN capability.
For international travelers, problems can arise if machines configured to accept chip-and-PIN cards are presented with a chip-and-signature card (or an old card with a mere magnetic stripe). This is uncommon, but it can happen, especially at automated payment kiosks that you might find in parking garages, toll booths and public transit stations.
The issuer of the card determines the card's verification method for purchases when the card is issued. If you have a card designated as chip-and-signature, and the terminal where you're making a purchase can work with chip-and-signature, that's how the purchase will be verified, even if you happen to have a PIN associated with the card, as you might have for a cash advance.
"If the card prefers chip-and-signature, and the terminal has chip-and-signature anywhere in its list of cardholder verification methods that it can accept, then that's what will go through," explains Julie Conroy, research director with Aite Group. "If I go to France, where chip-and-PIN is sometimes the only choice in these terminals, then many times I'm going to need to get a new card."
You should be able to use the PIN you requested at an ATM for a cash advance, but not for a purchase at, say, a train kiosk that requires a chip-and-PIN card to make a purchase.
So no, Bob, you cannot turn a chip-and-signature card into a chip-and-PIN card just by requesting a PIN. You have to make sure you have a card that supports PIN transactions as a method of verification. These are typically referred to as chip cards with PIN capability.
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Published: November 11, 2014
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