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Credit cards are nothing new in the United States or elsewhere in the world (there’s even a format to the numbers! Credit Card Numbers Are Not Random: How To Read & Understand Them Yourself Credit Card Numbers Are Not Random: How To Read & Understand Them Yourself You may have heard before that credit card numbers follow a certain pattern and structure so that they can be validated before a transaction is accepted. However, it's one thing to know that the structure... Read More ), but this year, a big change is coming to the plastic payment form that will make its transactions more secure.

Curiously, the USA is behind Europe and other countries that have already adopted the new credit card standard. Before you start seeing new terminals deployed in stores and get a weird new card sent to your house, let us explain what’s changing.

What’s Wrong with my Current Card?

As they are now, US credit cards have a magnetic strip that contains all the info about them, such as expiration date and card number. When you swipe one at a retailer, all that info is transferred to them so they can authenticate your purchase. When you shop online, you obviously can’t physically swipe your card, so you enter the card number, expiry date, and the secure code so you can be charged correctly.

This is all well and good, but insecure. In December of 2013, retailer Target suffered a massive breach Target Confirms Up To 40 Million US Customers Credit Cards Potentially Hacked Target Confirms Up To 40 Million US Customers Credit Cards Potentially Hacked Target has just confirmed that a hack could have compromised the credit card information for up to 40 million customers that have shopped in its US stores between November 27th and December 15th of 2013. Read More that included some 40 million credit cards’ information leaked. Anyone that had swiped their card at Target transferred their information to the company’s database, and when the hackers broke in they had all they needed to start fraudulently using the cards wherever they wanted.

credit-card-thief

The bottom line: currently, the magnetic stripe on your credit card allows its static information to be duplicated. If someone gets a hold of all your card’s information, it’s essentially as good as having the card itself.

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What do the New Cards Do?

Enter the new standard: EMV cards. Standing for Europay, MasterCard, and Visa (Discover and American Express are also on board), these new cards include a small chip that works with new payment terminals. Instead of swiping your card to pay, EMV cards require you to place them in a new slot, which is called “dipping.” Touchless payment is also possible with these cards, similar to Apple Pay and Google Wallet with your smartphone Everything You Need to Know about Apple Pay, Samsung Pay, and Android Pay Everything You Need to Know about Apple Pay, Samsung Pay, and Android Pay Android Pay, Samsung Pay, Apple Pay all have their advantages and disadvantages. Let's take a look at exactly how each of them works and who can use them. Read More , but to simplify the rollout this won’t be supported at first in the USA.

You leave the card in the reader during the entire transaction, and it creates a unique ID for that sale instead of handing over the unchanging info of your card. Even if a thief were to steal this transaction information, it would be basically useless to them because they can’t use it to charge the card elsewhere.

Chip-card

How Will This Affect Me?

This new technology will affect both debit and credit cards. Most reputable providers already have a no-liability policy which guarantees that you as the user aren’t responsible for charges placed by a swindler, but the EMV standard changes the rules a bit.

October 1, 2015 is the deadline for businesses to start accepting the new chip cards and for providers to give them out to their customers. If a business chooses not to upgrade to the new readers and your credit card information is stolen at that store, for example, the business is responsible, not the card company. You won’t experience any changes in liability from the migration, but payment will be a little different.

EMV-Card-Reader

New readers have a slot to accept EMV cards like the picture above. To make the movement more fluid, the first wave of chip cards will still have a magnetic stripe than can be used just like before. However, if you have a chip card and try to swipe it like you did in the past, it won’t accept this; you’ll need to “dip” it. The magnetic stripe is only included to allow you to interact with legacy readers that haven’t upgraded yet, where it will function in the same way it used to.

The authentication standard will be a bit different in the US than it is elsewhere. Chip and PIN, used abroad, is a method that requires a PIN at payment time for each different credit card. To avoid forcing people to remember yet another password 6 Tips For Creating An Unbreakable Password That You Can Remember 6 Tips For Creating An Unbreakable Password That You Can Remember If your passwords are not unique and unbreakable, you might as well open the front door and invite the robbers in for lunch. Read More for their credit cards, the US will be starting with the Chip and Signature method, more reminiscent of the current method. This less-secure protocol simply uses your signature to authenticate purchases, which isn’t great because many retailers don’t even bother to check if the signature on the card matches the one you give them.

Will It Help Much?

Though this new standard will help prevent credit card fraud, it isn’t perfect. The physical cards will still have expiration dates, numbers, and security codes on their backs, so online credit card fraud What To Do If You’re A Victim Of Online Credit Card Fraud What To Do If You’re A Victim Of Online Credit Card Fraud Read More won’t be defeated. A thief could also forge your signature with your physical card to make unauthorized purchases, or find an old terminal that haven’t adopted the new standard. However, when it comes to finances any bit of protection is a step in the right direction Five Ways To Protect Yourself And Not Get Scammed On Black Friday Five Ways To Protect Yourself And Not Get Scammed On Black Friday Read More , so these cards will definitely help somewhat.

What do I Need to Do?

Realize that there won’t be a country-wide change on October 1. Card-issuing companies are trying to get EMV cards to customers before that date so that they aren’t liable after the deadline hits. You’ll likely receive an email, letter, or notice on your bank or credit card company’s website about the new standard, and how they plan to roll it out. Most will probably go by current card expiration date, so it may be a bit before you see your shiny new card arrive.

If you’re interested in getting a new card right away, contact your company by phone, email, or even Twitter and ask what can be done. Keeping on top of your finances is essential 8 Websites to Help You Plan Your Financial Future 8 Websites to Help You Plan Your Financial Future Personal financial planning is a vital aspect of modern living and you need to understand it. These websites will help you improve your bank balance or wipe out your overdraft. Read More , as we’ve been writing about recently, and these cards are just one more way to protect yourself.

Chip cards won’t be a revolutionary change, but they are an important one. Now you know all about them and what to expect as they begin appearing in the wild.

Interested in more about card payments? Check out five PayPal alternatives to consider Making Online Payments - 5 PayPal Alternatives to Consider Making Online Payments - 5 PayPal Alternatives to Consider Is PayPal the best and most secure method of making online payments? We look at 5 PayPal alternatives that you should consider. Read More , as well as Android tools that allow you to accept credit cards on-the-go Credit Card Processing On Android: Best Tools For Accepting Payment Credit Card Processing On Android: Best Tools For Accepting Payment Want to process credit card payments on your Android device? Here are the best tools for getting it done. Read More (and what this means for the EMV standard!)

What do you think about the new EMV cards? Will you be adopting a chip card soon, or waiting for one to come to you? Comment below and let us know!

Image Credit: Smart card Via Shutterstock, Thief via Shutterstock

  1. Peter
    May 23, 2015 at 10:53 am

    We've had this in the Caribbean years now, and we're considered third world. Good for you America.... finally catching up to the third world nations.

  2. John Maloney
    May 23, 2015 at 10:33 am

    'Failing behind' is an unintended consequence of 'being first.' It is relatively easy and low-cost to implement new tech, and extremely difficult and expensive to replace legacy tech...

  3. Bniedem Malti
    May 23, 2015 at 5:24 am

    About time!
    Wake up U.S.A.

  4. Michael
    May 22, 2015 at 11:29 pm

    I remember using my chip card (I'm Canadian) in Tampa on vacation a few years ago,and the scary thing was the transaction was approved just by swiping through the magnetic stripe reader,with no signature required! Not sure if that was connected with the chip somehow.

  5. Keith
    May 22, 2015 at 7:00 pm

    Thanks for this info... I received a new card from Citi several months ago and I noticed right off the chip on the front, but did not know what it was for. I soon discovered I had to insert and leave my card in the the machine at Walmart to complete a transaction. I was puzzled, but now I understand. I must say I like it and it is much faster to use.

  6. Akis
    May 22, 2015 at 8:55 am

    And how one would use this card online (web transactions)?
    Does anyone know anything about this?

    • Ben S
      May 22, 2015 at 3:29 pm

      There is no difference when using these new cards online. The chip only affects in-store transactions.

  7. Knut
    May 21, 2015 at 6:54 pm

    It will soon be the the mobile phone only also in the US, since what the above does not address is intercepting the card transactions from the payment terminals - like the ATM that have installed skimmers.
    But the mobile phone cannot be "skimmed". Beside that, this article is correct, and many comments about the US being a decade or two late.

    • Z.Edgar Hoover
      May 22, 2015 at 11:57 pm

      Knut: I don't think this is correct--with EMV, my understanding is that the PAN never leaves the MSR machine, so it never gets to the payment terminal--only the one-time ciphertext, which is essentially a token, leaves the MSR.

    • Knut
      May 23, 2015 at 12:19 am

      A "skimmer" captures all physical properties of a card / device for the purpose of mimicking the card / device and do the transaction again. An ATM will read the card and charge your account and present money. So, all the infomation needed will be provided to the ATM, and sent on to authorise the withdrawal. (Do not use three letter abbreviations when you do not know what they mean). The banks have their own closed networks that is pretty secure and the ATM hangs on this, or the ATM can hang on the GSM (mobile) network. GSM is secure, according to mil.spec. The "skimmers" will intercept all wires but not fibre. With a mobile device, you know the location of the two parties, capture the exchange as much as you like, but since the payment providers can match in real time, a token will never be reused. A packet switched network cannot offer the service of point-to-point authentication, messages are intercepted, captured and tampered with.

  8. Ed
    May 21, 2015 at 1:51 pm

    Don't think I can remember a time when i didn't use chip and pin... If I'm honest I don't really understand why the U.S. uses such an insecure system! A signature is never secure!

    • Ben S
      May 22, 2015 at 3:30 pm

      I don't really get it either, Ed. At least we're stepping in a more secure direction, but it would make sense to just get everything over to the most secure way at once.

  9. Jay
    May 21, 2015 at 9:54 am

    In the UK we've had contactless payment for a while and it's cool af.

  10. Alex
    May 21, 2015 at 9:15 am

    Wait what? Is this the same as "chip and pin" technology that's been around in the UK for over a decade...? Is the US only just getting that? Sometimes it shocks me how long technologies designed for safety and security take to become standards...

  11. Merle
    May 21, 2015 at 12:40 am

    "Curiously, the USA is behind Europe and other countries that have already ..."

    Fill in the blank and in most cases you'll be correct. If it weren't for the opportunity to shift responsibility for stolen information, and costs, to merchants, U.S. banks wouldn't have made the change for many more years.

  12. kenijo
    May 20, 2015 at 7:39 pm

    The chip will help prevent savage magnetic strip copy by unscrupulous merchants.
    But that's only half of the problem. While the rest of the world is using the chip with a PIN code to unlock the transaction, the US stays with the signature which won't prevent stolen cards from being used ...

  13. Zack McCauley
    May 20, 2015 at 5:23 pm

    We are so behind it's ridiculous. Glad to see we are finally catching up to the rest of the world. If only we could do that with out measurement system.

    • jimvandamme
      May 23, 2015 at 2:27 am

      ...and our slow, expensive internet.

  14. Keefe K.
    May 20, 2015 at 4:12 pm

    I'm so glad to hear that my American neighbors are finally going to make use of the chip on cards. Canada had made the transition years ago and because I was always so used to inserting the chip in the bottom, I always got impatient looks from merchants and fellow customers when I'd inserted my card in that manor. I had always been mystified as to why the machines had a slot for that kind of technology but it was never used. AT any rate, it's nice to see the US starting to catch up with the latest technology that will hopefully at least slow down fraud some.

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