New Credit Card Chip Technology Puts Businesses On The Hook For Fraud

By Paul Muschick
The Morning Call (Allentown, Pa.).

You may not have noticed much difference if you used your credit card at a store Thursday, but it was a big day for banks that issue cards and for merchants that accept them.

This is related to the new cards you may have received in the mail from your bank. They have a computer chip embedded in the front and are designed to reduce fraud stemming from data breaches.

As of last Thursday, with a few exceptions, businesses that aren’t equipped to read the new cards will eat the cost of fraudulent retail purchases, instead of banks automatically accepting that responsibility. Banks still will cover fraud on cards that don’t have chips until those cards are phased out.

For cardholders, nothing changes in that department. You still won’t be liable for unauthorized charges. But you will have to get used to the new technology.

Instead of swiping the magnetic stripe on your card through the edge of the machine, you must insert a chip card into the machine and leave it there until it’s read, and then sign.

“It’s going to take a little bit longer,” said Doug Johnson, senior vice president of payments and cybersecurity policy at the American Bankers Association.

Tami Cohorst, chief operating officer at Abtek, a credit card processing and merchant account servicer in Detroit, told me it will take about eight seconds for a chip transaction compared with about three seconds for a swipe transaction.

While that doesn’t sound like a big deal, she foresees the potential for checkout lines to back up, as more chip cards and readers are rolled out amid the holiday shopping season and cardholders and clerks adjust to the new technology.

Wells Fargo is sending customers instructions with their chip cards and working with retailers to help them understand the new technology, said Heidi Detweiler, a retail small business credit consultant for the Lehigh Valley in Pennsylvania. The bank also has guidance on its website.

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