Home > Credit Cards > What’s Really Happening to Your Credit Card on Oct. 1?

Comments 4 Comments

Credit cards with magnetic stripes are being eliminated in favor of cards with fraud-fighting computer chips. Here are all the details you need to know as a cardholder.

Why is Oct. 1 important?

Banks and merchants have been inching toward the magnetic-to-chip transition for a long time. New rules take effect Oct. 1 that provide a dramatic incentive to make the switch. The rules govern who pays when credit card fraud occurs. After Oct. 1, most merchants that aren’t equipped to accept chip cards will have to pay when fraud occurs. While all chip-card point-of-sale terminals won’t change overnight, that’s a pretty big carrot.

I still have an old magnetic stripe credit card. Will it stop working?

Generally, no. Most point-of-sale terminals will be able to accept both mag stripe and chip cards.

How will this affect me directly?

Ideally, very little. There will be a slight difference in the procedure for using plastic at checkout. Instead of swiping your card, you will insert your card — similar to the way you insert a card into an ATM. Then, you’ll have to wait a moment while the card is authenticated.

What if I still swipe my card?

If your card has a chip on it, most chip-ready terminals won’t accept a swipe. They’ll force you to insert the card into the chip reader.

Why should I care?

In theory, chip cards are nearly impossible to counterfeit. Switching to chip cards will virtually eliminate a certain kind of credit and debit card fraud that’s very common today called “card cloning.” In cloning, criminals steal account numbers and other basic information, then encode a separate piece of plastic with the data and use it to make fraudulent purchases or in some cases, cash withdrawals. That’s how a criminal can steal from your credit card even if your card is still in your wallet. Because the chips haven’t been cloned yet on any kind of wide scale, this version of credit card fraud is expected to drop significantly, as it did when European nations switched to chip cards. So that’s good news.

Will it eliminate all credit card fraud?

Heck no. In fact, there is some debate about whether it will reduce fraud at all, or merely shift it to other forms. Switching to chip credit cards, on its own, does nothing to stop “card-not-present” fraud, such as use of stolen account information to make fraudulent online purchases. When card-present fraud drops, everyone expects card-not-present fraud to rise. So it’ll be even more important that you check your credit card statements each month to spot crime. (If you’re worried about other forms of identity theft and fraud, you can monitor your credit scores for free on Credit.com to spot any unexpected changes that could signal bigger identity theft issues.)

Why do I keep hearing the term “EMV?” What does it mean?

That stands for Europay Mastercard Visa, the three firms that originally developed the standard. In this context, “chip card” or “chip credit card” or sometimes even “smartcard” means the same thing as EMV card.

How does it work?

When a chip card is inserted into a reader that recognizes it, the chip wakes up and performs a calculation that can be checked on the spot to ensure the card is not a fake. Further authentication can then be conducted online with the cardholders’ bank.

The rest of the world has been using EMV for years. Why was the U.S. so slow?

Because telecommunications in the U.S. have traditionally been much cheaper than elsewhere. EMV was critical in Europe and beyond because it was too expensive to perform “online” authentication via phone calls in many places. EMV cards can perform some authentication checks locally, a great advantage in places where telecoms are costly. In the U.S., banks and merchants didn’t mind the long-distance phone calls, so the urgency for transition wasn’t there — until high-profile hacks of retailers like Target really forced the situation.

How far along is the change?

If you ask Visa, pretty far. The firm says 141.9 million chip cards have been issued in the U.S., and 301,000 merchants are chip-ready, a 547% increase over last year. Other folks aren’t so sure. Gallup and Wells Fargo released a survey in August involving 600 small-business owners, and only 29% said they would be ready to accept chip-enabled cards by Oct. 1 do so before the deadline. An additional 21% said they never planned to make the switch.

More on Credit Cards:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • david.luesley@gmail.com

    Foresee a lot of confusion and lost cards in the short term. The fact that for the chip transaction to initiate and complete the card must be placed in the authorization device to lead to a lot of cards being left in authorization devices, especially in self service locations. This is similar to the observed user behavior of early ATM’s where the ATM kept your card hostage throughout entire transaction and once the user received their reward (withdrawal) in true Pavlovian fashion left the ATM card in the machine and/or left the session and did not log out. As the chip transaction does not require signature a card “found” in this manner could continue to be used till reported stolen.

    • Stahlilama

      Like anyone looks at a signature anymore.

    • Jeffery Surratt

      I do not believe the pay at the pump credit card terminals have been updated yet and the cards work at swipe only terminals just like older cards. The terminal tells you when to remove the card from the slot, so for 99.9% I do not see a problem.
      The banks are very slow issuing the new cards, so by the time everyone has them, we should be passed the learning curve. All credit cards lost or stolen can be used until reported, I have almost never been asked for other ID when using my card, as far as signature, good luck reading mine with the stupid pens it never looks the same.

  • Truthteller

    The banks issuing chip cards are slow on the uptake I have more than one credit card which hasn’t been re-issued with a chip and the new card one bank sent me doesn’t have the chip and expires in 2019. I think banks should be required to issue the chips cards.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team