American credit card companies are reissuing cards containing a chip, stating that they are a more secure and new technology. Meanwhile, chips have been used in the EU for over twenty years. Here’s background on the chips and how they work.
A credit card with a chip in it is called an EMV card, EMV stands for Europay, MasterCard and Visa. The EMV consortium collaborated and created the chip technology and standard in an effort to make payment card transactions more secure.
How do they Work
The chip on an EMV card communicates with an EMV-compatible credit card terminal in one of two ways, either its insertion into an EMV terminal or via radio frequency. When a transaction is initiated, the chip and the terminal work together to create a unique transaction session and to secure the data in the event that the data is illegally intercepted electronically.
In the event that transaction data is captured or intercepted by a thief, the only information they could retrieve would be a huge amount of meaningless and unusable numbers. And, unlike the information found on the magnetic strip located on the back of a credit or debit card, the EMV chip is nearly impossible to counterfeit. Data on magnetic strip cards can be easily replicated and used to create multiple credit cards, which thieves use to quickly make purchases before the card is reported as stolen. But, for the added security features to work, an EMV card must be used in an EMV terminal. EMV terminals require the card to be inserted during the transaction, or by using a form of radio communication called Near Field Communication (NFC). EMV cards will continue to have magnetic strips so that non-EMV terminals can process a payment.
What if your Card is Lost or Stolen
Sadly, nothing has changed if your EMV card is lost or stolen. You must call your credit card companies or issuing institutions and report it as soon as possible because thieves can use it to make fraudulent purchases.
Can EMV Chip Data be Stolen
While EMV cards use RFID (Radio-Frequency Identification) technology it is highly improbable. EMV chips utilize specific radio bands to communicate called Near Field Communication (NFC). NFC radio signals degrade quickly and can only be transmitted within a distance of centimeters. The requirement of close proximity practically eliminates the risk of a device communicating with an EMV chip from a distance.
Why Did it Take So Long
Credit card companies have been slow to switch to the EMV technology for two main reasons. First, EMV cards are more expensive to produce than traditional cards. And second, retail merchants did not have EMV-compatible terminals. An EMV card used in a regular terminal defeats the purpose of having a chip. With the rise of credit card data breaches, card issuers are now moving quickly towards EMV. Larger merchants have switched over to the new EMV technology, but small to mid-sized merchants have been slower to switch because of the cost of putting new terminals in place. However, credit card companies have fought back and as of October 1, 2015 the rules have changed. If a merchant accepts payment for goods from a stolen EMV card on a non-EMV-compatible terminal, the liability for covering losses shifts from the card issuer to the merchant. For example, imagine that your EMV card is stolen and used to make a purchase. The merchant accepts payment for the goods using your stolen EMV card but uses a non-EMV-terminal to process the transaction. When you report your credit card stolen, the issuer will review the transactions on your credit card to identify fraudulent and non-EMV-compliant transactions. In order for you to get your money back, the credit card company will charge back the amount of the purchase to the merchant’s bank account. So it’s definitely in the best interest of the credit card companies to issue EMV cards and it’s in the best interests of retail merchants to use EMV-compatible terminals.
Hopefully, more merchants will make the switch to EMV and we can all breath a bit easier.
Sources
https://www.heartlandpaymentsystems.com
The information found on the Gerstenberger Law site is for educational purposes only. Your situation and the situation of others is unique and more complex. This is neither legal advice nor to be considered legal advice. Contact us for advice about your specific situation