For credit card users, your chip has come in
How they work: It may take some getting used to for customers
The nation’s merchants are not exactly racing to install new chip card readers by Oct. 1, when they will face liability for fraudulent credit and debit cards. Those that have made the switch say it’s pretty painless, once you get past training employees or customers to insert chip cards into a slot at the end of a terminal rather than swiping them.
“Every transaction has an extra five seconds of awkwardness, like a weird first kiss where you say, ‘How do we do this?’ ” said Pete Mulvihill, co-owner of Green Apple Books in San Francisco.
To spare consumers that embarrassment, here are some answers to questions
about the new technology. Q: How do I use my chip card? A: Instead of quickly swiping your card with the magnetic stripe through a slot, you insert it into a different opening — chip end first with the chip facing up — and leave it there until the machine prompts you to remove it. This is called dipping, and it takes a bit longer than swiping because you are waiting for the transaction amount to be finalized and a one-time code generated.
This code makes it extremely difficult to counterfeit or copy a card. But it does not prevent someone from finding or stealing your card and using it. Almost all U.S. credit cards with a chip still require only a signature, which can be easily forged, rather than a PIN, which is harder for thieves to know.
If you use a debit card with a chip to withdraw cash from an ATM, you will still have to enter a PIN.
If you use a chip debit card to make an in-person purchase, you can use a signature or a PIN. Even if the machine asks for a PIN, you (or a thief ) can still use a signature.
“Chip is a step forward for consumers. Chip and PIN would have been better,” said Ed Meirzwinski, consumer program director with U.S. PIRG. Q: How do I know if a reader can accept a chip card? A: If you swipe a card with a chip through the magnetic-stripe slot, and the reader is chip-enabled, it will tell you to dip. Some merchants have labeled their chipenabled readers, some have a blue light. If the terminal is not equipped for chips, you will still use your magnetic stripe. Q: How much longer does it take to complete a chip card transaction? A: It varies. At Andi’s Market in San Francisco, where customers dip their own credit cards, it takes an extra 15 or 20 seconds compared with a mag stripe card, store manager Victor Vega said.
At Paper Caper in Burlingame, which has a fast Internet connection and store personnel who dip the card, “it’s a couple seconds” longer, said co-owner Dale Ferrel.
Carolyn Balfany, a senior vice president with MasterCard, said it generally takes an extra second or two but might seem longer because “you leave the card in the slot while it’s completing the transaction.”
Warning: Until people get used to waiting longer, some might leave the store with their card in the reader, Bob Sullivan wrote in a blog post at Credit.com. Q: What happens on Oct. 1? A: Today, card-issuing banks are generally liable when fraudulent cards are used in brickand-mortar locations. On Oct. 1, the liability shifts to whoever has not invested in the new technology.
If the card has a chip and the merchant’s terminal cannot take chip cards, the merchant is responsible. If the terminal can accept chips but the card does not have a chip, the bank is liable. “The real objective of the liability shift is to create incentives for both the banks and merchants to upgrade the card and terminals to chip,” said Balfany.
One exception: For pay-at-the-pump gasoline purchases, the liability shift will take effect Oct. 1, 2017. Q: Does this affect fraudulent online purchases? A: No. The chip has no role in online transactions. “Merchants already bear some liability for fraudulent online purchases, and that won’t change,” Balfany said. Q: Does this affect the customer’s liability? A: No. If your credit, ATM or debit card is lost or stolen, two federal laws limit your liability for unauthorized use. The limits depend on the type of card and when you report the loss, the Federal Trade Commission says. Most card issuers and networks offer additional protection beyond what is required by law, but terms vary. (For details, see http://1.usa.gov/ 1eqykOW and http:// bit.ly/1Lbesj1.)
Those limits and protections will not change as a result of the liability shift. “This is all a battle between the banks and merchants,” said Matt Schulz, a senior industry analyst with CreditCards.com. Q: How widespread is chip card use today? A: Not very. Visa says that only 18 percent of Visa credit and debit cards had chips in late August, but it expects that 60 percent will have them by the end of the year.
It also reports that about 301,000 merchant locations accepted them. That’s roughly 5 percent of all locations, according to Visa. It expects that 47 percent will have them by the end of the year.
Gwyneth Borden, executive director of the Golden Gate Restaurant Association, estimates that only 5 percent of San Francisco restaurants have installed them, partly because of confusion over whether tipping comes before or after dipping. Q: How much do these readers cost? A: It varies widely. Ferrel said he got it free when he renewed the contract with his card processor.
Mulvihill said he was first quoted a price of $600 per terminal, but after negotiation got it down to $300 each. Q: Are devices like Square able to read chips? A: Square has two devices capable of reading chips. Its Chip Card Reader, which accepts both chip and mag stripe cards, is available now for $29.
It is taking orders for a new Square Reader that will accept chip cards and contactless payments (such as Apple Pay), but not mag stripe cards. The cost is $49 with a $49 processing credit, or basically free. It will start shipping in the fall. Square said it will cover liability shift-related charges for sellers who place advance orders for the Square Reader. Merchants will still need a separate reader for mag stripe cards. Q: How will this affect ATM transactions? A: Some ATMs are equipped to process chip card transactions, some are not.
If your card stays visible, insert your card as you normally would. “If the ATM is chip-enabled, it will prompt you to insert the card again and leave it inserted. The ATM will clamp down on your chip card to hold it in place until the transaction is complete,” according to GoChipCard.com, run by an industry consortium.
If the ATM is not chipenabled, follow the prompts and complete the transaction as you normally would; you do not have to reinsert the card.
If your card is not visible, the ATM will automatically detect and use the chip. Your card will be returned at the end of the transaction.