"Chip and dip” is now a technical term.
By now, you’ve likely heard about the new EMV credit cards, which are embedded with a small magnetic chip to help prevent credit card fraud. But with the new facelift comes a flurry of questions—which is why we talked to experts to sort out the most important facts.
1. Swiping is out, dipping is in: Instead of swiping, you’ll dip the new cards halfway into a reader, give it a few seconds to read the chip, and then remove the card. Although this may initially slow down the check-out process, people will likely catch on quickly, says Liz Weston, author of Your Credit Score. “It only takes you once to figure out how it works,” she says. “It’s like using an ATM. It's not that complicated... it's just a little different."
2. It’s a huge improvement in security—even without the pin: Every time you dip, the new processing systems reads the silicone chip, which creates a unique transaction code that cannot be replicated by a criminal. There are two payment options with the new cards: chip and signature, or chip and pin. Across the globe, it’s about a 40:60 split—40 percent of countries use the signature, and 60 percent use the pin, according to Julie Conroy, research director for Aite Group's Retail Banking practice.
The United States will employ the chip and signature, but even without the pin, the card is still a vast improvement in security. “The bulk of the fraud and the fastest-growing fraud that we’re seeing in the US market is going to be addressed by that chip,” Conroy says. “The only thing that pin buys you is protection against lost and stolen fraud. Right now, that is less than 12 percent of all the card fraud in our ecosystem."
3. But continue being vigilant—especially online. While it's a huge security improvement for in-store purchases, most countries that have implemented the new cards have also seen an uptick in online fraud—particularly if retailers don't ask for the 3 or 4 digit number on the back of your card. So what can you do to decrease the likeliness of this happening?
First, keep an eye on your bank, credit card, and debit card statements, and register for the alerts that most credit card companies offer, says Conroy. Additionally, begin using different passwords for any websites where your credit card is on file. "Over 50 percent of consumers still use the same username and passwords across all online relationships," she says. "Have the same base password, but for eBay, put an 'EB' before the password. It's easy to remember, but still different."
4. Don't worry, your current card still works. The much-anticipated October 2015 deadline does not affect consumers; rather, it's the deadline for retailers to update their systems. The new processing systems will continue to have a swipe option, so you will be able to use your current credit cards for the foreseeable future. Some credit card companies will send new cards ahead of the expiration date, while others will wait until the card expires.
If you want your new card, you can likely call your bank to request one—a good idea for international travel. And when you receive the new card, don't hesitate to use it. "If you have an option, I’d stick with the dip,” says Weston.