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The Daily

Why Does My Debit Card Suddenly Have a Chip in It?

Chris Gaetano
Published Date:
Sep 29, 2015
By Izcool at English Wikipedia [Public domain], via Wikimedia CommonsBecause banks and retailers have until Oct. 1 to transition from traditional card readers to ones that can process new cards with EMV-enabled technology (EMV stands for Europay, Mastercard, Visa, the three entities that developed the standards for the new chips, according to the New York Times

EMV cards, which have already been widely adopted in other countries such as the U.K., are generally considered more secure than the traditional magnetic strip cards, as they're more difficult to copy, and has an additional layer of verification. 

This deadline comes not from the government but from Visa and Mastercard, who have said that after the Oct. 1 deadline, liability for fraudulent purchases made with stolen card information will be shifted to whichever entity had the least amount of security, according to Time. This is a change from current practice, where generally fraudulent purchases have been the responsibility of the financial institution. 

What this means is that if a retailer doesn't have an EMV-compatible card reader, and a fraudulent purchase is made through their business, then it is the retailer, not the bank, that is responsible for reimbursing the victim. This liability cuts both ways, however: if a bank hasn't issued EMV-enabled cards to their customers and a fraudulent purchase is made through a retailer that has already complied with the new standard, then the bank is considered responsible. 

There is likely to be a lot of liability on both ends immediately after the deadline: another article in the New York Times said that only 19 percent of credit and debit cards in circulation will have the chip. On the point of sale end, only 20 to 30 percent of retailers have managed to switch to the new card readers, according to American Banker

One exception, according to Time, will be gas stations, who will have an extra year due to the regulatory complications of switching up card readers at the pump. For everyone else, though, unless they're confident that they will never encounter a fraudulent purchase ever, they will need to make the switch. Soon, the scanner in the above picture will just look really dated.