Retailers will start to shoulder some responsibility for fraudulent charges, but consumers will see few differences starting Oct. 1
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Dear Cashing In,
I’ve been using my EMV credit card when I travel internationally for a while, but most stores I go to in the U.S. still just ask you to swipe the card. I heard that stores that don’t take EMV chip cards by Oct. 1 will be liable for fraudulent charges. So if I see a charge on my credit card statement that I didn’t make, who do I call? — Jennifer
There has been a lot of noise out there recently about this switch-over to EMV chip cards. And people are likely to continue hearing about it for the next several months, as banks continue sending chip cards out to their customers, and retailers install devices at the checkout counter that can handle the new cards.
Compared with traditional magnetic stripe cards, EMV cards offer enhanced security against fraud when used at a store that has a payment terminal equipped for such cards. With little effort, fraudsters can easily create counterfeit cards with mag stripes. However, it is thought to be virtually impossible to create fake EMV chip cards that work because of the nature of how the chip interacts with the payment terminal.
Unlike magnetic-stripe cards, every time an EMV card is used for payment, the card chip creates a unique transaction code that cannot be used again.
The major payment networks (Visa, MasterCard, American Express and Discover) are encouraging banks to issue EMV cards and retailers to install new equipment that takes advantage of secure EMV technology. Beginning Oct. 1, 2015, banks and retailers could be liable for fraudulent card purchases unless they adopt this new chip and chip-reading technology.
In some cases, as you point out, retailers will for the first time become liable for fraudulent charges if they do not have equipment that is able to process payments using a card’s EMV chip. Those transactions will still go through, since even the newest EMV cards have magnetic stripes on the back. But the store would be on the hook for any fraud.
One important piece of information for all consumers to know is that banks and retailers are keenly aware of the need to keep the process as simple as possible at the checkout register. Fearful that too much change will discourage people from using their cards, banks and retailers have rejected measures that would enhance security but be more complicated, such as requiring consumers to enter a PIN with an EMV card.
Instead, the only change consumers are likely to see is the difference in how the cards are inserted into the payment terminal. EMV cards at EMV-ready terminals will be inserted into the bottom of the card reader, as opposed to swiped on the side of the machine.
Other than that, the consumer experience with EMV cards is largely the same as with magnetic-stripe cards. Jennifer, you will still talk to your bank if you see fraudulent transactions on your statement. Your bank will still alert you if it encounters suspicious activity on your account. You’ll continue to have virtually no responsibility for fraudulent charges, assuming you report them promptly and accurately.
Merchants might now be responsible for some fraudulent charges. But they will work that out directly with the bank. That process will be invisible to you.
Randy Vanderhoof, director of the EMV Migration Forum, an industry group, told me: “Consumers should continue to shop where they shop and use cards where they use them and not worry about what is going on between the merchant and the bank in the background in regard to the liability shift.”
Jennifer, you can keep using your card as you usually would. Yes, that’s what the banks and retailers want you to do, but it also happens to be good advice.