Credit and debit card holders will have an added measure of safety this holiday shopping season in the form of an embedded chip that makes the cards difficult to counterfeit and protects consumers from fraudulent transactions.
Millions of new cards will be issued in the coming years as the old ones with magnetic strips are slowly phased out.
“Consumers who receive cards encoded with the new chip technology from their credit card companies should welcome this latest development as a further safeguard against credit card fraud,” said Travis Mountain, a Virginia Cooperative Extension specialist and assistant professor of agricultural and applied economics in Virginia Tech’s College of Agriculture and Life Sciences. “But with new technologies come new challenges and there are certain things consumers need to be aware of.”
Mountain offers these recommendations for using the new cards:
- Even though these cards are safer, the new technology does not prevent fraudulent transactions that may take place online or over the telephone. It also will not prevent someone from using your lost or stolen card.
- Be aware of phishing scams. Consumers may receive phone calls or emails from individuals claiming to be from a credit card company who want to verify personal information on the new cards.
- Because information on your card has changed, make sure you update any automated payments you have established. If you don’t update this information, automatic payments may not be processed.
- For added security, some card issuers are providing joint and authorized users of a card a different credit card number. For example, if your adult child is currently an authorized user of your credit card, your child now may have a different account number.
- The chip creates a unique code for every transaction, preventing someone from using a copied version of your card.
- When using the new chip card at a retailer with the new readers, you must insert your card into the reader and keep the card in the reader until instructed to take it out at the end of the transaction.
- As the holiday gift-giving season picks up, allow time and patience when you break out the plastic. Cashiers and consumers who are not familiar with the new process will likely lengthen the checkout process until everyone gets familiar with the new technology.
- When you get your new chip card, it will likely have the same account number, but a different expiration date and three-digit security code.
- The first generation of chip cards will also feature a magnetic stripe on the back of the card so that you can still swipe the card, like you did with your old card, if the retailer doesn’t have one of these new readers.
- Larger institutions are taking the lead on issuing the chip cards, but not everyone has received them. If you have not yet received a chip card, call your card company and ask when you can expect to receive one to ensure your new card did not get lost in the mail.
As of Oct. 1, financial liability for fraudulent purchases now lays with either the retailer or the financial institution issuing the card, whichever party has not adopted the new chip technology. While larger retailers may be quicker to make the security upgrade, smaller retailers may not be aware that the small investment of a few hundred dollars can provide protection from huge financial liability, and this has the potential to put them at risk.
“Now mom-and-pop stores that haven’t implemented the chip-readers can be held accountable for fraudulent purchases,” Mountain said. “This could be costly for them.”