New chip-and-signature cards help foil card counterfeiters

You may have received in the mail (or will soon) a new credit and/or debit card that looks much like your old one, except for a small metallic square on the left front. The square is an embossed microchip, and it features a new technology designed to reduce fraud at merchant locations.

How do I use it?

Thousands of merchants around the U.S. are installing new payment terminals to accommodate chip-equipped cards. When you’re ready to pay, instead of swiping your card, just insert the end of it into the terminal, chip side up. Leave it there while you follow the on-screen prompts. Lastly, you’ll sign a payment slip to complete the transaction.

Why the new cards?

Although your new chip card also has a magnetic stripe for use at older terminals, the fact is that “mag stripe” technology is easy to hack. Armed with real account information stolen in a previous data breach, thieves program this data into the stripe on a counterfeit card. They then go on a shopping spree, buying merchandise that’s charged to the identity theft victim’s credit card account. The thieves line their pockets by reselling this merchandise on the black market. The card-issuing bank pays for the loss, not the merchant or the real accountholder.

With the new card, the microchip authenticates the card and generates a unique encrypted code with each transaction. It’s much more secure than a magnetic stripe.

You’ll be seeing more chip card-enabled terminals as time passes. By then, merchants who haven’t converted to accept chip-based payments will start to be liable for any fraud committed with a chip card. (Gas stations have until 2017 to upgrade their pumps.) Full transition to the new chip-based standard may take a few years.

Is the technology proven?

Chip cards have been used for years throughout Europe. In fact, the technology behind the chips is called the EMV standard – short for EuroPay, MasterCard, and Visa.

What does it mean for me?

Your consumer protections stay the same. As before, you’re not liable for a fraudulent transaction, provided you notify the card issuer as soon as you become aware of it. A few more tips:

  • If the merchant doesn’t provide a chip-enabled terminal, be prepared to “swipe your stripe” just as you’ve always done.
  • You can also use your chip-based card to make purchases and payments online or by phone, as always. Credit cards still aren’t accepted in ATMs unless they’ve been issued a PIN (often available on request).
  • The most important thing you can do is to keep your card data secure. Check your monthly statement for suspicious activity, and shred statements and receipts you don’t need.
  • As this last tip suggests, it’s too early to relax your vigilance. Chip cards promise to be valuable fraud fighters at merchant stores and offices in what we call “card present” transactions. The next challenge will be bringing stronger technology to “card not present” purchases in the online universe.

At Acadia Federal Credit Union, we’ll continue to stay on top of developments that help us protect our member’s accounts. Today’s chip cards, we believe, are an important step into a more secure future.