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Have you received a new “chip” card for your credit card account? If not, you likely will in the next couple months. Even though most European countries have been using this “new” technology for almost 10 years, the United States is just now trying to catch up to provide more fraud protection on our purchases. Although the U.S. only accounts for 25% of all credit card transactions in the world, roughly half of all credit card fraud happens here.
For well over 40 years, credit cards in the U.S. have used the magnetic strip that you swipe through a card reader. These strips are easily duplicated because the information doesn’t change. Places like gas pumps and ATMs may have a thief’s skimmer, or illegal card reader, unnoticeably attached to the machine. Hacks have stolen credit card data from major businesses and caused lots of concern and hassle. We’ve even heard of machines that can read the information off the magnetic strip while it is still in your wallet or purse. Your card’s information can then be programmed onto a magnetic strip of a fraudulent card and the thief is off buying big screen TVs while you are left straightening out the mess they caused.
The new cards will have a silver square on the front of the card. This is a computer chip. Instead of the static data held by the magnetic strip, the computer chip assigns a unique code to every transaction you make using a chip reader. So, if a thief gets a hold of your card information through a data breach, like what occurred with Home Depot last year, they wouldn’t be able to use that data and make a new card. This won’t stop data breaches, but it will limit how much a thief can profit from them.
Besides issuing you a new card, banks also need to make sure that their merchants/retailers are ready to accept these cards. There is a soft deadline of October 1st for merchants to upgrade their technology and be able to accept chip cards. Merchants that don’t update their machines by October 1st could become responsible for fraudulent activity as the issuing banks will be able to push back on their liability. Although there will still be a magnetic strip on your new card, you always want to select the chip reader, when available, to provide yourself the best protection.
So how do you use the new card? Instead of swiping, you will now “dip” your card. As shown in the picture, you slide the card in to the base of the card reader, chip first. The key is that you need to leave the card in until told to remove it. If you remove it too quickly, it will be declined. During my recent trip to Europe, it took a little getting used to and I had a few charges declined during my learning process. However, once I figured it out, I was impressed with the process. In my 2 weeks of travel, my credit card never left my sight. The chip reader machines were portable so waiters would bring the machine to me and process my transaction right at the table. Let’s hope we all get to enjoy the same experience here once everyone has had a chance to convert to the safer technology.