4 Facts About Chip Credit Cards You Should Know

Innovation is increasing, making modern technology antiquated. What was once a staple for quick and easy payment is now getting a face-lift.  That’s right, the credit card as we know it is dying and its replacement comes with added security.

The U.S. payment industry is shifting to the new chip and dip credit card technology in an effort to make in-person purchases safer. If you were recently issued a new credit or debit card, chances are it is a chip card. With the new card, you’ll insert it into a terminal slot in a “dipping” motion. The data then flows between the card chip and the issuing financial institution to verify the card’s legitimacy. This is the game changing technology that makes it difficult for anyone but the rightful owner to use the card, and protects against the creation of counterfeit cards.

Long used in Europe and other regions to help reduce credit card fraud, chip technology is finally receiving widespread adoption across the U.S. In fact, for American businesses that don’t offer chip-enabled credit and debit card transactions after October 2015, liability for any resulting credit card fraud will fall to the business-owner instead of the bank. Here are 4 facts about the new card technology that can help new users adapt to the way they complete transactions

Fact 1:  You won’t know whether a store accepts EMV cards. Several retailers have already begun the process of upgrading their systems and equipment to prepare for chip credit cards but some card owners may find that smaller businesses do not have the updated technology to accept this form of payment. If you are ever in doubt consider swiping your standard card first.

Fact 2: Chip-enabled cards, or Euro-pay, MasterCard, and Visa (EMV) cards are nearly identical to the standard magnetic stripe credit card, but are encrypted with a small computer chip rather than a magnetic stripe. A small, metallic square on the front of the card contains the same information as traditional magnetic-stripe cards, such as name, card number and expiration date. However, with chip technology, each transaction generates unique, dynamic data.

Fact 3: The process is a bit longer than with a traditional credit or bankcard. Most consumers are used to swiping their cards immediately after a purchase or while items are still being totaled. That is not an option with EMV cards. The card can only be read after the items have all been added and a total is given. A consumer must then allow the card to be read for a short period of time. This allows the chip and the network to communicate. Once communication is complete, the purchase is made.

Fact 4: While the transaction takes more time than a basic swipe, the increased security benefits are expected to be worth it. However, smart-chips will not entirely eliminate credit card fraud. You’ll still need to monitor your credit card accounts and credit score regularly to protect your identity.

It will take time for all retailers to offer chip-enabled terminals. Additionally, not all credit card providers have delivered the new cards to customers.

Many experts believe that this new technology will greatly reduce the risk of fraud and help consumers with their financial future. Speak with your financial planner to discuss whether the chip card is right for you.

 

Sources:

 

“8 FAQs about EMV Credit Cards.” CreditCardscom News. N.p., n.d. Web.

 

“New Chip Credit Cards Are Supposed to Help Prevent Fraud.” WFLA. N.p., 21 Sept. 2015. Web.

 

“Switch to Chip Credit Cards Kicks in.” CNBC. N.p., 01 Oct. 2015. Web.

 

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2015 FMG Suite.

 

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