Credit Cards

Have you ever heard of “dipping” a credit card? If you use a credit card in the U.S., then you will be hearing that term lot more this year.

What Is ‘Dipping’?

Dipping is the term the industry has adopted to describe how a credit card with an EMV smart chip is read. An EMV chip is a small silver- or gold-colored square visible on the front of many newly-issued credit cards. Currently, cardholders and merchants “swipe” their cards so that terminals can read its magnetic stripe, but very soon, credit card users in the U.S. will be asked to dip their cards into a card reader to conduct a transaction.

How This Will Work

Credit card users in Europe and other parts of the world where EMV-enabled cards have been issued have gotten used to dipping their cards. Cards are inserted into the terminals lengthwise, with the chip side first. The machine will usually give an audible or visual signal when it has read the smart chip, and a cardholder can then remove the card.

In many ways this is similar to how some ATM machines read magnetic stripes, but in this case, the card doesn’t need to be fully inserted into the machine. In addition, the smart chips will be read much more reliably, so cardholders won’t have to experience the frustration of having a worn magnetic stripe that must be swiped several times.

When Will We Start Dipping Cards in the U.S.?

On Oct. 1, the credit card industry will undergo what is being called the liability shift. What this means is that retailers will be responsible for the cost of fraudulent transactions when they have failed to upgrade their credit card readers to be smart chip compatible, and when customers have a chip-enabled card. On the other hand, when customers weren’t given cards with smart chips, but the retailer has deployed the latest credit card terminals, then the card issuer will bear the liability if the transaction is fraudulent. In either case, cardholders are protected from fraudulent charges by the Fair Credit Billing Act. This law limits a cardholder’s liability to $50, but nearly all card issuers go beyond the law to offer a $0 liability guarantee.

Rather than have all retailers change over their machines on midnight of Sept. 30, the liability shift was designed to encourage both retailers and card issuers to adopt the latest technology gradually, and to give all parties a chance to get up to speed at their own pace. Nevertheless, gas stations and ATM machines will be given until October of 2017 to comply with the new standards. At this time, there are many retailers that are using terminals that have a place for customers to dip their cards, but so far few (Walmart is a notable exception) have actually enabled this functionality.

As the Oct. 1 liability shift approaches, more and more customers will be asked to start dipping their cards at compatible card readers, even though these terminals still have a magnetic stripe reader. Inevitably, there will be some minor confusion as customers and cashiers have to unlearn habits formed over decades of credit card use, and figure out when they need to swipe their cards, and when cards must be dipped.

Most observers expect this confusion to be short-lived, as the industry moves forward into a more advanced and secure method of reading credit cards for retail transactions.


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