We've all gotten used to hearing "Is it a chip?" when we pull out our credit card at checkout counters. Many of our favorite retailers process "chip" card transactions with ease, although some still ask us to swipe. Chip cards embed payment data in a microprocessor inside the card, rather than in the magnetic strip. And although consumers may not care whether they dip or swipe, credit card transaction processing is important to merchants and card processors, primarily because of fraud liability.
Starting on October 1, 2015, liability for fraudulent transactions performed using a swiped card shifted from the card issuer to the merchant. That means merchants that don't upgrade their pay systems to chip-friendly processing technology must pay for fraudulent charges. Whether you dip or swipe, here's what you need to know about your new chip credit card.
Chip cards are also known as EMV cards. EMV stands for Europay, MasterCard, and Visa. The chip embedded inside an EMV card creates a unique transaction code every time it's used. This special security feature helps prevent card counterfeiting, because it makes it more difficult for criminals to illegally collect credit card numbers and security codes during transactions. The magnetic strip can't create unique transaction data, and card issuers and merchants that use the older technology may be held liable for fraudulent purchases. That's why card issuers and merchants prefer processing payments with EMV cards. For more information about keeping your credit card information safe, read 4 Tips to Help Keep Your Credit Card Information Safe While Shopping Online.
When a consumer dips an EMV card, a tiny microprocessor inside the card transmits credit card payment information to the card issuer. That exchange verifies the credit card is authentic. It also creates the unique transaction data. Merchants need a special EMV chip card reader in order to accept EMV cards, because chip card transactions are considerably more complex than magnetic strip transactions.
No. Credit card chip technology has been in use in Europe and other parts of the world since the 1990s. A desire to update transaction technology, and the need to accommodate American and international travelers, spurred the transition to get EMV credit cards in the U.S. For more information about using your credit card while traveling, read 4 Tips to Consider When Using Travel Credit Cards Overseas.
You may still able to use a credit card with a magnetic strip if you don't have a chip-embedded card, since EMV terminals also accept swipes from cards with magnetic strips. If your credit card issuer has not yet upgraded your card and you want to adapt to newer technology, there is another option. You may also be able to use a digital wallet.
A digital wallet stores credit card information in an app on your smartphone. At checkout, use the app to bring up the card you want to use, and then tap your phone on the pad at the register. This may reduce your need to present a physical card. For more information about digital wallet payments, read Digital Wallets Demystified.
Whether you use a chip card, a magnetic strip card, or a digital wallet, consumers have more payment transaction options than ever before. With more than 80 countries now using EMV technology, travelers can feel more confident using chip cards overseas and at home.