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Swiping is stale: How to use your credit card's new chip




An EMV chip embedded on a credit card. Starting October 1st, retailers who do not have a device that reads these chips will now be liable for losses when they accept a fraudulent card.
An EMV chip embedded on a credit card. Starting October 1st, retailers who do not have a device that reads these chips will now be liable for losses when they accept a fraudulent card.
Flickr user Ciaran McGuiggan/Creative Commons

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If you got a new credit or debit card recently, you may notice it looks different. The change is more than cosmetic: It is designed to protect you from fraud, too.

New chips embedded in the cards, called EMV chips, are designed to be safer than the traditional magnetic strip on the back.

Sienna Kossman from CreditCards.com explained to Take Two how they work.

How does it work?

Instead of swiping your card, you place your card into a slot in a reader. Reading that card will take a few seconds longer than you're used to. Once it's gone through, you may have to use your signature like before.

Why does it keep my information safer?

You see those 16 numbers on the front of your card? If a criminal got their hands on those numbers – either by looking at your card up close or grabbing the information off the magnetic strip – then they are one step closer to using it to buy whatever they want using your account.

With EMV chips, however, a special code is generated every time you use it. That code is like a handshake between the store you are at and your bank, verifying the transaction. The code cannot be used again after that.

If a criminal tried to steal your information during that electronic handshake, they would not see your account number – only that code which is unusable.

Where else are these cards used?

All over the world, actually. The U.K. has had these cards for about a decade. When they were rolled out in 2005, counterfeit fraud dropped by 56 percent.

What's happening October 1?

The major credit card companies agreed that on this date, stores may now be liable if a counterfeit card is used at their business.

Previously if someone used a fake card, then the bank that issued your card would be on the hook for covering the costs of what was stolen.

Starting Oct. 1, businesses can now be responsible for those costs. It depends on who has the "lesser" technology.

If a store has a credit card machine that can read a chip but your bank didn't give you a new card, then your bank is responsible.

If your bank gave you a new card but the store doesn't have a machine that can read the new chip, then the store is responsible.

Consumers are protected either way. This date is all about whether businesses want to risk taking on that liability.