What's the Deal: Insert, don't swipe, your chip card

A lot of big retailers are not processing chip card transactions the way they're supposed to, even though the deadline to start using the new transaction method was eight months ago.

And this failure could have big consequences for you if you're a victim of a security breach.

Chip cards provide significantly more security than cards with magnetic stripes, but only if you use them properly.

To get the highest level of protection, you have to insert the chip card into a special reader, not swipe as our undercover shoppers were instructed.

Wawa, Wegman's, Bed Bath & Beyond, Staples, Sephora, Pet Supplies Plus, Chick-Fil-A and Giant are just a fraction of a long list of retailers that do not have chip card readers up and running.

Some Whole Foods even cover the slot where the card should be inserted.

Panera has a sign to swipe.

"It seems like most of them should be using them by now," said Penny Welsh of Haddonfield, New Jersey.

Here's how chip cards better protect you: The chip sends the retailer a unique code assigned to your transaction instead of your credit card number. That code is useless to a criminal.

The credit card industry set a deadline of October 2015 for retailers to adopt the new system.

So whose fault is it that so many consumers still can't use it?

"It's the card industry that's dropped the ball," said J. Craig Shearman of the National Retail Federation.

Chip card readers must be certified by the credit card companies to ensure they work properly. Ultimately, the card companies have to turn on the machines.

"They didn't provide the resources to get everything certified so we have retailers out there who have this equipment sitting there ready to go, installed for six months," said Shearman. "And they're still waiting for the card people to come around and certify and turn it on."

The card industry says the delay is due to poor planning by the retailers who are now creating a rush hour effect with so many trying to get enabled at once.

"If merchants didn't start early enough, they are finding themselves being caught up in a queue of waiting to get all of those necessary pieces in place," said Randy Vanderhoof, Smart Card Alliance.

As the consumer if you swipe a chip card and end up the victim of a security breech, the merchant is now liable, not the card company.

That means instead of your bank or credit card covering a suspicious charge, the onus is on the retailer to do it.

MORE INFORMATION

Mastercard Response:

The consumer is protected. Period. In May 2014, we extended our already existing Zero Liability policy to all consumer and small business cards in the U.S. Under the policy, our cardholders are not held liable for any fraudulent or unauthorized transactions on their account. That same protection is now in place in all markets across the globe, making MasterCard the only payment network to provide that peace of mind.

October 2015 was never set as a deadline. That was a milestone we had set to help provide an incentive to both merchants and issuers in the migration plans. As you noted, that was when the liability would shift to the party with the lower technology. But, each merchant and issuing bank would determine when would be best for them to implement chip card technology.

Since the U.S. started this journey, we've begun to see a reduction of counterfeit card fraud. And the trend will continue as more cards are activated and more terminals adopt the EMV standard.

Wawa Statement:

We are very focused on securing our customers' information and also want to provide a great customer experience. We are working with our POS provider to provide a version of EMV that limits the inconvenience to our customers as we evaluate and actively pursue solutions.

Wegmans Statement:

October 1, 2015 was an arbitrary deadline chosen by the credit card companies as the date when liability associated with fraudulent transactions (counterfeit cards) shifts from the card company to the retailer. The credit card companies have not yet all issued the new cards. In fact, only about 50% of the debit and credit card transactions we currently see use EMV-enabled cards.

Beginning 10/1/15, retailers who are not yet EMV-enabled must bear the cost of a fraudulent transactions if a counterfeit card is used.

In 2015, Wegmans installed more than 3,000 new payment terminals in our stores, all equipped to accept EMV cards. However, we have not yet completed all the necessary software changes, and don't have a firm timeline for going live. We are willing to take a little longer to complete the project in the interest of getting it right.

It's important to remember that a customer is still protected from the cost of a fraudulent transaction when a counterfeit card is used. Before 10/1, the credit card companies absorbed those losses. After 10/1, if a counterfeit card is presented at a retailer that is not yet EMV-compliant, the retailer will bear that loss.