5 Things to Know About October’s Credit Card Changes

5 Things to Know About October’s Credit Card Changes

This fall, America will be doing the dip.

We’re not talking about some new dance craze—but rather the switch from swiping credit cards with magnetic stripes to dipping new chip-enabled ones at checkout.

This safer chip technology (known as EMV, for Europay, MasterCard and Visa, the companies that created the standard) is already common in Europe and Canada.

And it’s high time it arrived stateside: While America accounts for 21% of the world’s card transactions, we’re saddled with 48% of counterfeit fraud, according to The Nilson Report.

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“Migrating to chip technology will help drive fraud out of our ecosystem and establish a technological platform for the next generation of payments,” says Carolyn Balfany, a security expert at MasterCard.

She explains that when you insert a chip card into a payment terminal, the chip and the terminal “talk” and generate a one-time code for each transaction.

“If someone were to use this unique code again, the transaction would be flagged—this is how chip cards help eliminate counterfeit fraud.”

That should come as a relief to anyone who has worried about hacks of major retailers like Best Buy or dealt with having to cancel their cards due to fraud or, on the other hand, had legitimate charges blocked.

While shopping with a credit card is going to become a safer, smoother experience, the transition that kicks off October 1 may be a little rocky.

So here are five things you should know to navigate the card changes ahead.

1. Some people are receiving chip cards sooner than others.

EMV card readers are slated to go into operation at stores as of October 1, yet a survey conducted in late August found that three in five consumers still hadn’t received updated cards in the mail.

Some banks have been waiting to issue chip cards until a user’s card expires, while others got a head start in late 2014 and have been rolling new cards out in batches. (If you’re not sure whether your card is the new version, check the front for a metallic rectangle, likely on the top left.)

The card industry estimates that 63% of Americans’ credit and debit cards will contain EMV chips by the end of this year, expanding to 98% by the end of 2017.

Still waiting for yours to arrive? Matt Schulz, senior industry analyst at CreditCards.com, suggests you inquire with your bank about possibly expediting the process. “You certainly won’t be the first person to call and ask,” he says.

In the meantime, if you’re using a traditional magnetic-stripe card, it’ll be business as usual at the checkout counter.

“All these new EMV terminals will also have the capability for you to swipe your card like you have for decades,” Schulz says. “Your [old] card will still work; you just won’t have the benefits of the safer technology.”

2. Be prepared to dip—and wait.

The new chip-enabled payment terminals require you to insert your credit card. Once you’ve got that new card in hand, you’ll dip it in with the metallic chip face up and leave it in the terminal until you’re prompted to remove it.

The cards rolling out in the U.S. typically call for a signature, rather than the even more secure chip-and-PIN combination used in Europe. (As Schulz notes, "it’s much harder to know someone’s PIN than it is to forge their signature.")

Until an upgrade to PIN technology comes along, when prompted for a signature, you’ll sign while your card is still in the reader. The process takes slightly longer—and shoppers and clerks will need to get used it to it—so prepare to be patient.

And don’t forget to remove your card when the transaction’s finished!

3. Not every retailer is on track with chip card reader installation.

Businesses have an incentive to upgrade to EMV chip card readers by October 1, when the liability for fraud shifts. If fraud occurs at a store that doesn’t yet accept the new chip cards, the merchant will be responsible, not the bank.

Many big box stores, like Target, have installed chip card readers. Small businesses, however, haven’t necessarily paid for the upgrade yet, according to Schulz.

The good news is that new chip cards still include a magnetic stripe on the back—so they can be used with old technology as well as new. Just be aware that you may have to vary your approach from one store to the next during the changeover phase.

4. You’ll still be protected from the costs of fraud.

While the October 1 deadline shifts fraud liability to any merchants who haven’t upgraded, consumers will have no more liability than in the past.

That means if you do become a victim of credit card fraud, you’ll still have the same protections and won’t be expected to pay for transactions you didn’t authorize—regardless of your card’s technology.

RELATED: I Was Bank Hacked! An Honest Look at U.S. Banking Security

5. The catch: Chip card safety won’t extend to online shopping.

Because the magic happens when a chip reader interacts directly with a chip-enabled card, these new cards don’t offer any safety benefit when you’re shopping online or over the phone, cautions Schulz.

So while analysts anticipate fraud to decline at brick-and-mortar stores (as it has in other countries), online hacks are expected to rise. Research firm Aite Group estimates that online card fraud will more than double, from $3.1 billion to $6.4 billion annually, between 2015 and 2018.

Card issuers and retailers are considering security features that might eventually stem this rising online tide. In other words, October 1 is just the beginning—don’t expect the chip to be the last card update you’ll see.

RELATED: 6 Ways Credit Cards Can Be Good for Your Finances

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