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Smart Credit Cards Will Get Smarter
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Link-Up Digital

Aren’t the new “smart” credit cards a pain? If you have one of the cards with a computer chip embedded on its front, you know that using it is less convenient.

Some merchants have chip card readers, and some don’t. You don’t know without asking, or without first swiping. If swiping doesn’t work, you have to insert the front edge of your credit card just right, then leave it in until the transaction is over. All this adds to the time it takes to pay.

This may get better soon, at least in part.

On April 19, 2016, Visa announced that it will be upgrading its software to enable you to insert your chip card into a card reader and withdraw it in two seconds or less instead of waiting until your purchase is authorized. This will make the experience more like swiping your card. You’ll be able to put the card right back in your wallet while your items are still being rung up.

The new smart credit chips are designed to reduce credit card fraud, and they appear to be successful. Among 25 large merchants that experienced the most credit card counterfeit fraud at the end of 2014, five that began processing credit and debit cards equipped with the new computer chip technology experienced an 18% drop in such fraud, according to Visa.

But not all merchants have equipped themselves with credit card terminals designed to read the new chips. Visa says that five large merchants that haven’t done this have experienced an 11% increase in fraud.

Beginning on October 1 of 2015, a new law stipulated that merchants that don’t use the new technology will now be liable themselves if a crook uses a counterfeit credit card. Before that, the bank issuing the credit card was liable.

What hasn’t changed is that consumers for the most part are still not liable for credit card fraud. If your physical card is stolen, federal law limits you to $50 in liability as long as you report the theft within 60 days of receiving your statement. Typically, however, credit card companies waive the $50 charge. If your information alone is stolen, you have zero liability.

Along with being called chip cards, smart credit cards are also called EMV cards. EMV stands for “Europay, MasterCard, Visa,” the three companies that created the technology. The new cards produce a unique code for each transaction, which changes each time the card is used.

Among big retailers, Walmart has been at the vanguard in taking advantage of these cards. In implementing the software update, called “Quick Chip,” the world’s largest retailer says that it has cut the time of chip card transactions in its stores by as much as 11 seconds.

But just as not all stores have moved to being able to read the chips from chip cards in a timely way, not all will likely implement the new fast chip technology any time soon.

Visa says it will offer the quick chip update for free to payment processors, but they can decide if they want to charge merchants for it. Consumers won’t need to make any changes to the chip cards already in their wallets to use the faster service, and as with chip cards in general they’re not charged more for using them.

Along with Walmart, large national retailers such as Target, Home Depot, Lowe’s, and Best Buy have also stepped up to the new chip cards. But many regional chains and small retailers have not.

Currently chip-enabled cards are accepted by about 20% of U.S. merchants. The new chip card-reading terminals cost $500 to $1,000 each. According to MasterCard, 70% of its consumer credit cards are now chip enabled. Reducing fraud in the end reduces everyone’s costs, including consumers.

But some analysts think the new chip cards don’t go far enough. For transactions above a certain limit, they still require only a signature, which is virtually useless. The new cards provide no extra protection for online purchases or against the physical theft of a credit card.

A more secure option, which some countries in Europe and Africa have adopted, is to require punching in a PIN, or personal identification number, as you do when making a debit card purchase.

This would prevent the use of stolen credit cards or credit card information that’s stolen online. But it would be less convenient still, requiring even more time to complete a purchase, not to mention the possibility of forgetting your PIN.


Reid Goldsborough is a syndicated columnist and author of the book Straight Talk About the Information Superhighway. He can be reached at reidgoldsborough@gmail.com or reidgold.com.


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