Money

Few are ready as deadline for 'chip' credit cards arrives, but don't panic

Thursday is chip card day – the deadline for merchants to have terminals in place to accept chip-enabled credit cards – but the majority won’t meet it.

New data from Visa shows only 314,000 merchants – just 5 percent of the estimated 6 million retailers with physical stores -- have the technology in place as the switchover arrives.

Consumers aren’t ready to go either, according to Creditcards.com. More than six in 10 haven’t received their chip-enabled cards yet.

It’s a chicken-or-the-egg problem, explains Creditcards.com senior industry analyst Matt Schulz. “Research shows that a low percentage of merchants are ready to accept these cards. Once that’s established, it becomes less of a burning deadline for the issuers. Then the merchants say, ‘Why are we going to put these in when the cards aren’t out?’”

Jamie Topolski, director of alternative payment strategies at Fiserv has been working on EMV (as the chip-enabled payment system – an acronym for Europay Mastercard Visa -- is called) since 2008. He knew this deadline was going to land with a thud.

What the chip and PIN credit card deadline means for you

“The sheer quantity of people and cards takes a long time to convert over and we started late,” he said. “Every country that’s gone through this before it has taken several years. We’re no different.”

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6 in 10 don’t have chip-enabled credit cards yet

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6 in 10 don’t have chip-enabled credit cards yet

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So what happens now? Don’t panic. Remember, this was a deadline for merchants not for consumers. Starting Thursday, if your card is used fraudulently, the merchant (if it doesn’t have the chip system in place), rather than the card issuer, is supposed to be liable for the loss. The liability never fell on you before and it won’t now.

Still, these cards are safer than magnetic stripe ones, so here’s what you need to know about getting them in your wallet:

  • It’s fine to pick up the phone and call your card issuer. Ask what the schedule is for the card rollout, or simply request one. Your card issuer may (or may not) be set up to comply.
  • The rollout for debit and prepaid cards is taking longer than for credit cards. That’s in part because the debit card system in the U.S. – which allows you to enter a pin or sign for your transaction – is different than in other countries. As a result, according to a survey by Discover’s Pulse subsidiary, only 25 percent of U.S. debit cards (about 71 million cards) will be chip-equipped by the end of 2015. The percentage of EMV debit cards in consumer's hands is expected to reach 73 percent by the end of 2016 and 96 percent by the end of 2017.
  • Your old card will continue to work. You don’t have to worry that you’ll belly up to the cash register and be turned away. “There’s not even a date suggested on the horizon where your magnetic stripe card will stop working,” Topolski said.
  • If you haven’t received your chip card by year end … still don’t panic. Some analysts believe issuers will have worked through the backlog by then, but Topolski doubts it. “No one should expect a surge in the next couple of days or the month of October. It will be a gradual process into 2016."

    With reporting by Kelly Hultgren

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