Credit-card chips: Why the new ones?

Associated Press

NEW YORK

The battle against credit-card fraud is inching forward.

As of Thursday, the liability for fraud committed using traditional MasterCard and Visa magnetic-stripe credit and debit cards will shift from banks to stores. The move is part of a drive by the banks and payment companies to get people to use the new, more secure cards embedded with computer chips.

Roughly half of all global credit-card fraud occurs in the U.S. even though the country makes up only about a quarter of all credit-card transactions, according to a report by Barclays earlier this month.

In part, that’s because a 50-year-old technology that relies on a magnetic stripe at the back of the card, has lingered in the U.S. despite being replaced in most of the world. The weakness with this technology is that cards can be easily copied by thieves, leaving people vulnerable to fraud.

But the switch over has been slow.

While Thursday was originally targeted as the deadline to get most Americans using the new chip cards, the vast majority of transactions are still being made using the magnetic stripe.

Visa, the nation’s largest payment network, said it had roughly $11 billion in U.S. chip-card transactions for the quarter ending Sept. 30. In comparison, Visa had $631 billion in total transaction volume in the U.S. in the same quarter last year.

Most large retailers have replaced their equipment, but thousands of small businesses have not, and there are still hundreds of millions of credit and debit cards that need to be replaced.

The biggest difference between the old card and the new ones is the metal chip embedded on the front, which means your personal data is much safer. The chip assigns a unique code to every transaction made. That means that if a thief acquired that code, it couldn’t be used to make another purchase. Chip cards are much harder, if not impossible, to duplicate.

To use your chip card, instead of swiping your card at the checkout, you’ll insert it into a machine with a slot similar to that at an ATM. Keep your card in the slot until the machine tells you to remove it. Unlike magnetic strip cards, chip cards need to be left in the reader for a few seconds to work.