New EMV Chip Card Changes

October 1st marks a big day for credit card companies and merchants as they adapt to chip technology. You’ve seen it on the news and probably received an updated credit or debit card from your bank with an embedded chip.

These new “chip cards” or “EMV cards” (EMV stands for Europay, MasterCard and Visa, the three groups that developed the chip payment protocol) are designed to better prevent counterfeit card fraud.

But what happens if the store doesn’t have their chip card payment devices up and running? What exactly does this mean for credit card fraud? Here are some frequently asked questions – and answers.

Q: What happens if you haven’t received a chip credit or debit card from your bank yet? Or if you head to the store but they don’t accept chip technology yet?

A: The liability for any fraud shifts to whichever party (issuer or merchant) that isn’t EMV compatible.  Shifts for ATMs take place in 2016 and 2017.  [In 2017, the same liability shift will take place for card readers on gas pumps.]

Many banks are pushing to have their cards be compatible as soon as possible. For example, Chase says it plans to convert more than 70% of its credit and debit cards to chip technology by the end of 2015. The bank is also upgrading its ATMs to accept chip cards. (Disclosure: I’ve teamed up with Chase Slate as a financial education partner.)

Q: Does the chip card protect me from online shopping or counterfeit fraud?

A: Unfortunately, the chip card doesn’t protect you from online or counterfeit fraud because it only works for in-person purchases like at stores and gas stations. Likely with the adaptation of chip technology, we’ll see online and counterfeit fraud surge, so make sure you’re not storing your credit information online. In fact, at Nerdwallet where I’m a contributor we suspect that when EMV rolls out in the US we’ll see trends similar to what the UK experienced with its EMV adoption. There, online shopping and other types of card-not-present fraud increased by 120% between 2004 and 2014. So while this makes a great attempt to prevent in-store fraud, it doesn’t protect you from every type of fraud.

Q: Does it really matter if I swipe instead of dip?

A: Yes, it actually does. Swipe-only terminals will bear an increasingly high risk for fraudulent transactions so always remember to dip. And, remember to take your card out of the machine before you leave!

And here’s a cool video Chase created showing how it works.

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