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FAQ: What you need to know about chip-embedded credit cards

Matt Hamblen | Aug. 13, 2015
Facing an Oct. 1 deadline, many U.S. merchants are taking steps to prepare for new, more secure, credit and debit cards.

The numbers are important because there won't be a complete conversion to chip cards for many years. It took Canada about eight years to reach 90 percent conversion to chip cards. Major retailers like Wal-Mart have been converting payment terminals to support chip cards for years.

How do I use a chip card?, a website supported by major banks and credit card companies, posted a three-step illustration for how to use a chip card. Step 1 is to insert the card at the bottom of the terminal, with the chip toward the terminal facing up. That's instead of swiping the magnetic stripe along the side of the machine.

Many new terminals will support both methods, as well as NFC payments via smartphones and smartwatches such as the latest iPhones or the Apple Watch, which use Apple Pay. NFC payments are usually done by just touching, or nearly touching, a device to a payment terminal and entering a confirmation on the phone. In addition to "touch and pay" with a smartphone, some retailers like Rite-Aid will support the ability to touch the terminal with a chip card to pay.

As the GoChipCard graphic notes, a key detail of the first step is that users should not remove the card from the reader "until prompted." Analysts have noted that, on the first few tries, U.S. shoppers who are accustomed to swiping magnetic stripes may be likely to remove their chip cards quickly. Sales clerks will have to be ready for this -- and patient enough to remind users to leave the cards in place until the terminal beeps or a light goes on, or until the clerk gives the customer the thumbs up. There are more than 20 vendors of payment terminals, and they have varying methods for confirming that a sale is complete and that a card can be removed.

There are a wide variety of chip card payment terminals, but they mostly look alike, as indicated in the illustration. Some will be attached to a pedestal, just as older magnetic-stripe card readers are today. The terminals will almost all have a keypad to capture a PIN (personal identification number) and a screen and a digital pen to capture a signatures.

Step 2 in the graphic is to "provide your signature or PIN as prompted by the terminal." Many retailers won't require either, especially if the transaction is for a small amount, usually under $25. There's disagreement in the industry about whether a signature or a PIN will be required for larger purchases, but the decision will be made by the banks issuing the cards. (More on that below.)


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