Chip-bearing EMV cards, and the extra fraud protection that goes with them, are being issued first to wealthier cardholders, a CreditCards.com poll shows
That big gap exists largely because of the way banks have rolled out the new cards, sending the rectangular-chip-embedded cards first to their customers who travel internationally. Those who have the cards and use them at retailers with compatible card readers enjoy enhanced protection against fraudsters stealing card data.
In the CreditCards.com poll of 1,038 U.S. adults, 46 percent of those with $100,000 or more of household income said they had a card with the chip, compared with just 13 percent of those with incomes less than $35,000. Overall, 26 percent of those surveyed said they already have EMV cards, as of Jan. 22-25, when the poll was conducted. Of those with credit cards, nearly one-third (31 percent) said they already have EMV cards.
Those figures are expected to climb dramatically this year, as banks step up the pace of replacing old-style magnetic stripe cards. However, if that pace follows even the most optimistic industry projections, millions of credit cards will lack the extra anti-fraud protections well into 2016.
Overall, according to the survey, young people, college graduates and residents of the Northeast and West were more likely to have the cards than other people.
Although poor people are less likely to have any kind of credit card overall, the difference can also be explained by the way banks are issuing the new cards. In the past few years, many have sent EMV chip cards to customers who travel internationally, since card readers in many countries have difficulty accepting magnetic stripe cards. For that reason, international travelers, who are likely to be more wealthy, are more likely to have EMV cards in hand now.
“There is a solid pool of those folks out there who have those cards already,” says Julie Conroy, research director with the banking consulting company Aite Group.
The poll was conducted online among a demographically representative sample of U.S. adults by ORC International on behalf of CreditCards.com. Of the 1,038 adults surveyed, 893 said they are credit card holders.
Among the survey findings:
- Of everybody surveyed, the wealthiest are more likely to have EMV cards than the poorest, 46 percent to 13 percent. Among those with credit cards, the wealthier are more likely by a ratio of 48 percent to 18 percent. These figures mirror those of another CreditCards.com survey from January 2015. In that survey, taken of those with investable assets of $100,000 or more, 46 percent said they have cards with EMV chips.
- Men with credit cards are more likely than women to have credit cards with EMV chips, by an advantage of 36 percent to 27 percent.
- Younger cardholders are more likely than their elders to have chip cards. Of those ages 18 to 24, 43 percent said they have EMV cards, compared with just 21 percent of cardholders ages 65 and older.
- Cardholders with more education are more likely to have the new cards. Of those with college degrees, 42 percent say they have EMV cards, compared with just 23 percent of cardholders who have only a high school degree or less.
Banks and EMV
More than 80 countries already use cards with EMV chips, also known as chip cards or smart cards. The technology in those countries is credited with drops in credit card fraud, because the cards are thought to be nearly impossible to counterfeit.
The effort to introduce EMV cards into the U.S. is receiving a big push this year because of changes in how expenses related to fraud are assigned. Beginning in October 2015, merchants that do not have EMV card readers might have to pay for fraud losses. Banks that fail to issue EMV cards can also be held responsible.
The way banks have chosen to issue EMV cards has been mixed. One common approach, Conroy says, is to reissue cards with chips to international travelers and to customers at a heightened risk of fraud and to include the chips in cards to new customers. Other existing customers might not receive cards with chips until their existing cards expire. In many cases, customers can call to request replacement cards with EMV chips at no charge.
Chase, for instance, says 19 of its cards have the capability to have EMV chips. The bank is getting them into customers’ wallets “using a combination of new acquisition, natural and mass reissuance,” says spokesman Rob Tacey.
Capital One is “taking a variety of things into consideration as we determine our ongoing rollout schedule,” says spokeswoman Sukhi Sahni. The company is trying to ensure that cards are reissued with minimal inconvenience to customers, and it has placed a priority on issuing chip cards to its travel reward card holders, since the chips are helpful to international travelers, Sahni says.
By the end of 2015, between 50 and 70 percent of U.S. cards should have EMV chips, according to industry estimates. Although those projections fall short of universal use, industry officials have said that the gap is acceptable because customers without the chip cards will be those at the lowest risk of fraud.
Although banks are stepping up the pace of issuing EMV cards, “the average customer still for the most part has no idea what is coming at them,” Conroy says. “Unless they’re traveling overseas, customers right now are still in the dark about this chip card thing.”
Getting EMV cards to consumers
Randy Vanderhoof, director of the EMV Migration Forum, an industry group, says the process of moving to EMV cards is steadily going forward. The next big step, he says, will be when more retailers begin enabling their card readers to accept chip cards. That could accelerate this summer.
When it does, consumers can expect to start seeing advertisements about the differences between using chips cards and those with the more familiar magnetic stripes.
“Merchants find it’s a little bit more difficult and taking them longer than they had planned for,” he says. “Rather than sticking to tight schedules and risk having problems, they’re taking more of a conservative approach and are delaying their activation until they’re sure they have all the pieces in place.”
He says he doesn’t worry about the wealth disparity identified in the CreditCards.com poll, because banks are just now starting the mass reissuance of cards. Until now, they have focused on smaller segments of their customer base, such as those who travel internationally.
“By summertime, that’s not going to make any difference at all,” he says. People with few transactions on their cards who are at low risk for fraud will probably be the last to receive cards with EMV chips.
Vanderhoof says he’s also encouraged by recent research that shows consumers quickly learn how to use EMV cards. Some in the industry had worried that the process of inserting a card into an EMV card reader instead of swiping it as they do now would cause confusion and disruption at the register.
“They may stumble the first time they use it and maybe the second time, but once they’ve used it once or twice, it’s going to be second nature to them,” he says. “This worry about how difficult it will be to educate those consumers might be a bit overstated.”