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Credit Cards and Microchips: Is the Chip Good News for You?

Credit cards with microchips

If you have a credit card, your card issuer might have recently sent you a new card, even if your old one wasn’t close to its expiration date. Thanks to changes in technology and to concern over recent data breaches, retailers and card companies are finally making the shift to credit cards equipped with microchips, also known as EMV chips. According to CreditCards.com, around 600 million card holders in the US should receive a chip card by the end of 2015. You might be wondering what these new credit cards mean for you.

More Security

The biggest change between chip-enabled cards and the classic magnetic strip cards is the boost in security now offered by chip cards. The information contained in the magnetic strip of a traditional card is static. It remains the same from transaction to transaction. If a thief is able to get that information and copy someone’s card, it’s easy to use the fake card to make purchases. Information contained in a card’s microchip varies from transaction to transaction. Every time you use a chip credit card, it creates a new, unique code. If a thief is somehow able to copy that code and embed it onto a duplicate card, the counterfeit card can’t be used, as the transaction code has already been used.

In Europe, people also use a PIN when they use their chip cards. For the moment, cards in the US won’t require the use of a PIN, so you’ll need to sign each time you use the card. The PIN adds another layer of security, as no one can use the card without it.

Shifting Blame

Part of the reason why it’s taken so long for credit cards in the US to become chip enabled is the cost of upgrading point of sale systems so that card readers work with chip cards. Retailers had until October 1, 2015 to make the switch, but many have yet to do so. Companies that missed the deadline can face greater fraud liability than in the past.

Before the chip era, credit card companies and banks were liable for any fraud that occurred on your card, not the retailers. Now in the chip era, stores can be liable if they haven’t made the switch to chip-enabled readers. For example, if you buy something using a credit card at a store that only offers a magnetic stripe reader, and your card data is stolen from that device, the retailer is responsible for covering the costs of any theft that takes place.

Your Responsibilities

If you are considering getting a credit card to take advantage of the chip technology, it’s important to remember that the chip doesn’t affect how cards work. You’ll still be liable for anything you charge to the card and will be responsible for interest and fees on any late payments or if you don’t pay your card balance in full each month. Remember to look at the interest rate charged, as well as any annual fee, and other fees when choosing a card.

Also keep your spending habits in mind when considering a chip card. If you’ve had difficulty overspending with credit cards in the past, getting a new chip card might not be the best option for you at the moment. Understanding your options and what getting a new card will mean can help you make the best decision as to whether a chip card is a good choice for you.

The team at CESI is committed to helping you make wise financial decisions and to helping you understand how to get out, and stay out of debt. For a free debt analysis, contact us and find out how we can help.

Image Source: Pixabay

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