What is EMV?
If you have a credit or debit card, you've probably noticed that it looks slightly different than your old card. As of October 2015, all newly issued credit cards in the U.S. will have an encoded chip. EMV chip technology makes it more difficult for thieves to access your financial data
Here's everything you need to know about using your EMV card and how the chip-based technology will keep your financial information more secure.
EMV makes it more difficult for criminals to duplicate your card
Credit card fraud is expensive and on the rise, especially in the US, where nearly half of the world's credit card fraud occurs even though the country handles approximately one quarter of the world's credit card transactions. According to an ACI Worldwide report published in 2012, 42% of Americans said they had experienced some form of card fraud in the past five years.
Part of the reason that credit card fraud has exploded is because the magnetic stripes on the back of traditional credit cards make it easy to steal card information. In fact, for around $100, thieves can purchase a machine that "skims" the information from a magnetic stripe and implants it onto a new, blank card.
EMV technology (EMV stands for Europay, MasterCard and Visa, in case you were wondering), works differently. In use in Europe for more than a decade, EMV microprocessor chips are embedded into your credit card. Traditional skimming devices won't work on these chips, and the technology makes it very difficult--and expensive--to clone a credit card.
EMV keeps your information safe once you've paid
During a transaction, the EMV chip produces a single-use code to validate the transaction. If someone were to steal the one-time code, the thief still wouldn’t be able to use that code to shop and couldn’t use the code to create a counterfeit card.
Longer transaction time
Instead of the typical credit card swipe, EMV readers employ a dipping method in which consumers place their card into a terminal that reads it and verifies it with a bank. Though this vetting process takes longer than a simple swipe, it creates a more secure transaction.
What if I get an error message?
That's nothing to be concerned about. For instance, if you swipe your EMV card on an activated EMV terminal, the machine will display an error and ask you to insert the new card. If you insert it on a non-activated EMV reader, the point-of-sale system will ask you to swipe the card instead.
Additionally, EMV cards contain one of two verification methods: pin or signature. More widespread in the U.S. right now, the signature method asks shoppers to sign a sheet of paper or a screen to verify that they’re the cardholder making the transaction. Many EMV cards will continue to contain a magnetic stripe, but this technology will be phased out as more EMV cards and readers are distributed.
Fraud liability structures won't change for consumers
No credit card is perfect.
Even as credit card providers introduce more secure technologies, fraud will still occur if there's money to be made. EMV cards are no exception. As of October 2015, credit card networks like Visa and Mastercard are changing their policies regarding which party pays if fraud occurs. In the past, banks or processors would pick up the tab if your card was copied or used illicitly. Now, the responsibility has shifted to the least compliant party in the transaction.
So, for example, if someone buys a new laptop with a stolen credit card at a store that does not accept chip cards, that merchant will be on the hook. Conversely, if the store has an EMV processing system but the bank has not embedded the chips into its card, the bank is responsible for the fraudulent charges. If both are compliant, the issuer will cover the cost.
October doesn't change everything
While liability changed in October, the EMV migration will likely take many years to complete. Even though merchants are induced by the new liability structure to implement EMV point-of-sale machines, they likely won't all immediately do so.
Consumers need not worry that their magnetic stripe cards will be obsolete by October if they've yet to be replaced. New point-of-sale systems will feature traditional magnetic stripe readers and EMV chip processors, and the first wave of new chip cards will also have stripes.
Remember to activate your card and update your information
When you receive your new card in the mail, you'll need to follow a few quick steps to get your payments up and running. First, follow the activation instructions that you receive with the card.
Next, remember to update your stored information with online and brick-and-mortar merchants. With Amazon, for instance, you'll need to input your new card number, security code and expiration date. If you have recurring payments set up, make sure to notify those merchants that your information has changed.