Reader S. asks,
I was in Norway 2 weeks ago – tried buying a train ticket, but the machine only accepted chip cards…same thing for the automated parking garages where you have to pay with a credit card only.
Everyone I saw was entering PIN numbers with their chip card – for US cards with the chip – do we have to get a PIN number? I have the Hyatt Card with a chip in it (my sapphire does not – can I request cards with chips now? How does that work?).
If we get a PIN number – is it still a credit transaction or does it become a cash transaction (never used a PIN for my credit card before – only my ATM cards).
Most US cards have only a magnetic strip on the back. That’s where card information can be found and read.
In much of the rest of the world, cards have an ‘EMV chip’ with encrypted information. It’s much more difficult to steal data from. (And a magnetic strip is easier to reproduce, too.)
In addition, cards have PIN numbers that consumers enter to validate a transaction instead of signing their name.
Increasingly many US cards are being issued with this chip in addition to magnetic stripe. This allows cards to be used where chip reader card machines are prevalent, especially in Europe but elsewhere in the world like Canada as well (these cards can also be swiped, but not everyone is used to or familiar with the process, or may get grumpy having to do it).
In the US, though, most cards are issued as ‘chip and signature’ rather than ‘chip and PIN’ meaning that the chip can be read, and then you sign the slip instead of entering a PIN number.
That’s fine, though less secure, but as a consumer advocate I prefer it. In the US if there are fraudulent charges on your credit card you rarely have any liability for those charges. A simple phone call (technically a written submission is better to protect your rights but rarely necessary) removes charges from your bill, you have no obligation to pay the charges while the fraud investigation takes place.
In E.U. countries chip and PIN cards can create a bias against the consumer in the event of fraudulent charges. If there’s fraudulent charges on the card, there can be a presumption that the consumer must not have protected their PIN. And if they’ve not been careful with their PIN, they’re at fault and liable for the charges.
When chip and PIN becomes commonplace in the U.S., one would clearly expect the banks to lobby for similar changes.
Still, PINs are useful for automated kiosks such as at European train stations or getting gas in rural areas on a Sunday.
US cards without PIN verification can be tricky to use in these cases. Although either a cash advance PIN, if you have one set, or ‘0000’ may work even if your card is merely ‘chip and signature’.
There are economic and historical reasons why chip cards haven’t taken hold in the U.S. as quickly as they have elsewhere, but we’re slowly moving in the direction of chip (though not yet PIN) offerings.
We’ll be seeing more and more chip cards in the U.S. But it will be a gradual process. There’s often talk of hard deadlines in the next few years but that’s a misunderstanding of what will happen. Take MasterCard, for instance, in October 2015 there will be a ‘liability shift’. But that doesn’t mean all cards will have to have chips, or that cards without chips will stop working. Instead,
[I]f a merchant is still using the old system, they can still run a transaction with a swipe and a signature. But they will be liable for any fraudulent transactions if the customer has a chip card. And the same goes the other way – if the merchant has a new terminal, but the bank hasn’t issued a chip and PIN card to the customer, the bank would be liable.
That just tries to incentivize banks to issue chip cards and merchants to acquire the equipment to use them. In other words, it’s the beginning of the transition, not the end.
For reader S., if you have an old Hyatt or Sapphire Preferred card without a chip in it, you can call Chase to request a new card with a chip.