U.S. financial institutions are finally issuing credit cards with EMV computer chips, which are widespread in other parts of the world. They promise to be more secure than traditional magnetic stripe cards
If you’re a credit card user, you’ve surely swiped the magnetic stripe on the back of your card countless times. But a more secure technology — already big overseas — is coming to our shores.
Chip cards are already standard in most other countries. They have a computer chip in the corner, sometimes called an EMV chip — which stands for Europay, MasterCard and Visa. Those are the companies that created the standard for chip more than a decade ago.Once the EMV readers roll out in the US in the next year or so, instead of swiping the stripe on your card, you’ll dip the chip — insert the chip card into the machine, then type in a personal identification number or sign the receipt.
Usually an EMV card also has a mag stripe so it can be used with a traditional reader, too. When you use the chip, though, you get better protection. Each transaction is assigned a unique code, so even if a thief captures your data, they can’t use it for new transactions. The PIN helps too.
“Essentially, anywhere the thief uses the card, either at the merchant or the ATM, it’s much more difficult for them to make the purchase or access the ATM account,” says Doug Johnson, vice president of risk management policy for the American Bankers Association.
According to Johnson, about 70 percent of the credit card readers around the world take chip cards. So why has the US been so slow to adopt them?
“We don’t have five banks, we have over 5,000 banks,” says Johnson. “We have a very large retail environment with many different types and sizes of merchants. And so it makes it a much more difficult prospect to really adopt EMV on a system-wide basis.”
Others say the industry is hesitant to give Americans yet one more PIN to remember.
“If the cardholder enters the wrong PIN multiple times, the card will think it is being attacked, and will, in fact, lock itself up, which would require the financial institution to issue that cardholder a new card,” says Randy Vanderhoof, executive director of the Smart Card Alliance.
Then there are the merchants. Some stores, such as Wal-Mart, already have EMV machines in place, ready to be activated. They’re under pressure from card networks such as Visa and MasterCard to make the switch by 2015, or accept liability for fraudulent credit card transactions. Right now, that responsibility lies with the bank that issues the credit card.
But some small businesses may still opt out of the change — perhaps even reverting to cash-only business if the costs of upgrading equipment and software is too high.
“If it’s thousands of dollars to convert all this, obviously you’re going to see a lot of small retailers not choosing to do this,” says shop owner Karen West. “There are still people who don’t even have computers.”
Gas stations will likely have until 2017 to accept EMV cards, because installing the new card readers with explosive gasoline around could be complicated.
Many banks are already making the chip cards available in preparation for the transition. Having the cards also helps Americans traveling abroad, who are increasingly facing trouble using mag stripe cards overseas.
“For Europe, it’s really inconvenient for travelers to have the magnetic strip card,” says American Charlotte Singh, who recently got a chip card and used it successfully in Amsterdam.
Before she got the chip card she would run into snags when traveling for business. “I was having lunch with my colleagues in the U.K. and I wanted to pay for them, pay for the lunch,” she recalls. She gave the waiter her mag stripe card and was met with disdain. “The waiter just gave me this big eye roll, like ‘Oh gosh, you Americans don’t have a chip card yet?’ This was actually at least three years ago.”