Though the credit card industry’s self-imposed deadline is Thursday, more than six in 10 American card holders still don’t have chip-enabled credit cards in their wallets, and retailers are nowhere near ready, according to a new survey.
Starting Thursday, merchants will be held fully liable for any losses due to credit card fraud if they are not geared up for the new, more secure, chip cards. And consumers will need to change their habit of swiping their credit cards to pay: Instead, they “dip” their new cards into terminals and leave them there until the transaction is complete. That is, if the retailer they’re shopping at has the necessary equipment.
The Strawhecker Group, a management consulting company for the payments industry, found in a recent survey that only 27% of merchants in the U.S. will be able to process chip-enabled cards by Oct. 1. The survey was based on 62 payment-service providers that work with over a quarter of the U.S. merchants that accept credit cards.
While businesses are clearly behind in upgrading their machines, a CreditCard.com survey shows that banks are not holding to their deadline either. The deadline was announced by the credit card industry about two years ago in an effort to improve data security and close the gap with other countries, particularly in Europe and Asia, which have used the more secure chip cards for years.
However, according to the CreditCard.com survey, conducted in early September, the goal might be too ambitious. Up until now, only 40% of card holders have gotten new chip cards, up slightly from 31% in late January. But those with annual incomes over $75,000 are twice as likely as lower-income-bracket card holders to have received their new cards in the mail. In addition, urban and suburban card holders are also more likely to have gotten updated cards than rural residents.
“It’s a big, long process,” said Matt Schulz, senior analyst at CreditCards.com. “This is the biggest challenge in decades in how credit cards are used in America.”
Mary Wilkerson, senior vice president of marketing at Central Bank of Boone County in Missouri, said the new technology and the demand of producing cards with both stripes and chips at the transition phase significantly increases the cost of cards. “We are in the very beginning phase,” Wilkerson said. She said the bank is still issuing new cards, and credit card holders will get their new chip-embedded cards by the end of this year. For debit card holders, new cards won’t be in hand until next year.
If you are among the 60% who haven’t got a new card, Schulz said there are two things you can do: Call your bank and ask when it’s coming, or apply for a new card.
However, Schulz also said card holders should not be too worried about it. All the new terminals will still work with old magnetic-stripe cards, and everyone should be able to get a new card by year’s end.
For those who have already gotten the new cards, Schulz warns that it doesn’t mean you are immune to fraud. “Chip cards should reduce fraud in stores that are able to process them, but an unintended consequence could be more fraud in other areas,” Schulz said. “Bad guys are more likely to focus on low -hanging fruit, like online shopping.”
Another place customers need to pay attention, Schulz said, is gas stations, which won’t be upgraded until 2017.
Schulz also said he hopes that banks can work on enhancing the security of mobile payments like Apple Pay and Google Money as they catch on with more consumers.