Financial IQ

Chip-Enabled Credit Cards are Coming: What You Need to Know

Swiping your magnetic-stripe credit card will soon become a thing of the past.

In the wake of widespread consumer data breaches like those at Target and Home Depot – plus increasing rates of counterfeit fraud – credit card companies nationwide are issuing new smart chip-enabled cards to improve payment security and provide consumers with greater protection against fraud.

Have you received your new chip-equipped credit cards in the mail yet? If not, you will soon: October 2015 is the “liability shift” deadline between banks and merchants. If a business doesn’t offer chip-enabled transactions after October, the liability for any resulting credit card fraud will fall to the business-owner and no longer the bank.

Here’s the scoop on what you need to know about chip-enabled cards, or as they are more formally known, EMV cards:

What’s EMV?

EMV cards – named after its original developers Europay, MasterCard, and Visa – are nearly identical to the typical American credit card, but they are encrypted with a small computer chip rather than a magnetic stripe. You will notice a small gold or silver metallic square on the front of your card. While this square contains the same information as magnetic stripe cards, such as name, card number, and expiration date, each transaction generates unique, dynamic data. This is the game changing technology that makes it difficult for anyone but the rightful owner to use the card, and it protects against the creation of counterfeit cards.

EMV cards have been the standard around the world for decades, but America is finally catching up: half of the world’s credit card fraud occurs in the US!

How Do EMV Cards Work?

Instead of swiping your card, you’ll insert your card into a terminal slot. This action is called “dipping”! The data then flows between the card chip and the issuing financial institution to verify the card’s legitimacy. Because these cards are read in this new, different way, you should know that the transaction is not as quick as a basic swipe; expect a slightly longer time at the point of sale. Though most of the world operates on a “chip and pin” system, Americans will still sign credit card receipts for the time being.

Keep in mind, your card will still have an magnetic stripe, too. Not all businesses will support “dipping” by October. In fact, a recent Intuit survey found that 42% of small businesses haven’t heard about the deadline yet!

Can I Still be a Victim of Fraud?

Though this new technology should give you greater peace of mind, smart-chips do not entirely eliminate credit card fraud. You will still need to monitor your credit card accounts and credit score diligently – at least once a month. That’s the best way to detect fraud in the early stages and keep your identify safe.

– Vera Gibbons, Mint Contributor and Personal Finance expert