Chip cards (also called smart cards or EMV cards) are credit cards that have an embedded microchip. When the card is used, the microchip creates a unique transaction code. This code makes protecting customer information easier. However, in order to accept chip cards at your business you need to upgrade your point-of-sale card readers.
Chip cards meet EMV—Europay, MasterCard, and Visa—standards. EMV is a global set of standards for both chip cards and their readers.
How do chip cards work?
The magnetic stripe on the back of traditional credit cards only contain information presented on the card: card number, name, expiration date, etc. Chip cards include an additional piece of information. When a chip card is inserted into a card reader, it creates a unique, one-time code. Every time the card is used, a new code is generated. This makes it more difficult for thieves to steal and use credit card information.
Why change to chip card readers?
If your business currently accepts debit and credit cards, also accepting chip cards could be a good move for you. About 10 percent of small businesses were victims of payment fraud in 2013, according to Javelin Strategy & Research. If you offer your customers the ability to use their chip cards, their information will be more secure and will be less likely to be stolen.
In addition, chip cards are more difficult to counterfeit, meaning you will now be at a lower risk of running a phony card.
Is there a deadline to upgrade?
If you choose to upgrade your card readers to accept chip cards, do so by October 1, 2015. After the October 1 deadline, your liability for stolen card information and counterfeit cards could go up. Currently, if a stolen or counterfeit card is used for an in-store transaction, the liability for consumer losses normally goes to the card’s issuing bank or the payment processor. After October 1, the liability goes to the least EMV-compliant party. This means if a chip card was used but you failed to provide a chip-card-compatible card reader, your business will generally be liable for losses. However, if you have a chip card reader, but the bank failed to issue a chip card to the customer, the bank will typically be responsible.
Updating to chip-card-compatible readers is not mandatory, but you will most likely be held accountable for card fraud that takes place at your business. Consider the pros and cons for upgrading. If your business receives few card transactions, you may decide that not updating your card readers is worth the risk.
What if I miss the deadline?
If you miss the October 1 deadline, do not panic. You can still get chip card readers after the deadline. However, you could be liable for fraudulent transactions until you get and set up your new point-of-service card reader.
How much do chip card readers cost?
Upgrading your current point-of-service card reader to a chip-card-compatible reader is an investment. According to The Wall Street Journal, chip card readers can cost under $100 for a mobile reader or up to $600 for a terminal. To get a chip-card-compatible reader, contact your acquirer or payment services provider.
Switching to a chip card reader may save you money in the future. If you have chip card reader, you have a reduced chance of being liable for fraudulent transactions. Otherwise, you could lose both the purchased product and what you must pay for the consumer’s loss.
You might also be able to increase customer loyalty. Customers may trust you more if your business is free of fraudulent transactions. If you do not offer a chip card reader, you may lose customers because you are not offering them security.
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