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Comment By Greg Stiles Mail Tribune MailTribune.com By Greg Stiles Mail Tribune Posted May. 24, 2015 at 2:00 AM By Greg Stiles Mail Tribune Posted May. 24, 2015 at 2:00 AM The new credit card chip: what you need to know --> People who own credit cards will get new cards that have both the magnetic stripe and a chip designed to verify that the rightful owner is using the card. When you stick your chip-embedded ca... » Read more X The new credit card chip: what you need to know People who own credit cards will get new cards that have both the magnetic stripe and a chip designed to verify that the rightful owner is using the card. When you stick your chip-embedded card into the new terminals at checkout counters, the system will read the amount of a transaction and whether it is domestic or international. Then it will verify the rightful owner through one of four methods: • Signature, the same verification method presently used by magnetic-stripe cards. • Online encrypted personal identification number sent in real-time to the credit card company for validation. • Offline PIN is sent to the chip card and is validated by the chip. • No signature required, typically used for low-value, low-risk transactions. The issuer of the card determines its preference for a particular transaction, which is set in the card profile. Visa has announced its policy is for chip cards to be read as chip cards at all times unless the card, chip reader or terminal is malfunctioning. Then the magnetic stripe can be used. At least in the early going, consumers can expect to spend a little more time at the checkout counter. Unlike the magnetic stripe swipe, cards have to remain in the machine until the transaction is finished. Early removal of the chip card from the reader will terminate the transaction. » Social News Like it or not, the future is at hand. Come Oct. 1, the credit card swipe will be passé as magnetic stripes give way to embedded chips and new terminals at the checkout counter to read a galaxy of information designed to reduce fraud. "Everything gets more complicated," says Tony Kell, general manager of Mattress Experts and Medford Mattress. "It's going to be kind of tricky with three stores. We'll definitely have to make sure our terminals are up to date." What has been standard credit card procedure in Europe and elsewhere soon will be the norm in the United States. While the new system, called EMV after Europay, MasterCard and Visa, keeps information safer, there's a potential downside: Merchants who don't adopt the chip technology will be liable for fraud costs once absorbed by the banks issuing the credit cards. "Whichever piece of the transaction with the least amount of security ends up holding the bag," says Craig Carpenter, a data security attorney with the Thompson & Knight law firm in Dallas, Texas. "When it comes to fraud, if you don't have the new chip technology, then you will be the weak link in the chain." Although the transition has been in the works for a half-decade, the change is long overdue, Carpenter suggests. "The reason why America is so late to the party has to do with the different costs throughout the process," he says. "The magnetic stripe sending information was really out of date compared to advances we've seen with computer security, fire walls and virtual private networks. This is the first upgrade in credit card technology we've had in several decades. It brings our credit card industry up to speed with the general increase of technology we have seen with computers and everything else." Following the United Kingdom's adoption of the system in 2008, fraud declined in that country, he said. "European countries were quick to respond out of necessity," Carpenter said. "Their Internet structure was not as strong." The cost to retailers will depend on how extensively they've upgraded their terminal systems in recent years. Merchants who upgraded without instituting the chip technology will have to shell out a few hundred dollars to lease or buy one of the new terminals. Kell says card reading machines at his three mattress stores vary in age. "In the past they've cost $400 or $500. I wouldn't be surprised if the new ones pushed one thousand bucks," Kell says. "Usually you can go quite a while on machines." With EMV chips on the horizon, the decision was made to lease. "Normally it's cheaper to buy a machine," he says. "But if you know you have to buy again in a shorter time, it's actually cheaper to lease. As we change out the machines in the future, we'll probably just buy them." Even though hardware salesmen have beat the drum for some time, Kell says, he expects some merchants to be taken by surprise. "We've been hearing chatter for the last three or four years," he says. "Some of the merchant processors were using scare tactics to sell equipment. When we changed machines a couple of years ago, they were telling us it was just months away. If merchants don't realize it's coming, I imagine it will be a little bit of a shocker." The irritant for major retailers will be the additional checkout time. "Transaction times will rise incrementally," Carpenter says. "Retailers hate things that increase transaction times, they want to make it as easy as possible to buy things. But once people get used to the dip-and-wait thing versus the swipe, it will be fine." For customers, EMV will mean getting used to new procedures at the checkout counter and fewer calls from credit card companies asking whether you really did make a purchase in Forest Park, Ga., or Littleton, Colo. "It's a positive thing," Carpenter says. "You will definitely see a decrease in fraud and ID theft, which is the fastest growing crime in the U.S." Even so, consumers need to remain wary of thieves. "It doesn't solve the problem," Carpenter cautions. "It only affects point-of-sale and card transactions. It won't increase online or over-the-phone security. So you need to be aware of where you are using cards and still be monitoring accounts." Carol Garfield, owner of Dancing Beads in downtown Medford, hasn't encountered fraud issues since opening her business in the late 1990s. The change, she says, will exact a different kind of cost for mom-and-pop merchants. "One more thing to worry about at night," Garfield says. "One more thing to have to explain to our customers. One more bit of legislation that tips us over the edge. Some businesses run really close to their bottom line." She is looking for processing machines compatible with an iPad or iPhone and going to the Square point-of-sale system, where receipts are emailed to customers. In general, she has no problem with the security aspects of the changeover. "However, it seems to be coming at our expense," Garfield says. "The large card carriers, like Visa and MasterCard, are washing their hands of responsibility and putting it onto the shoulders of the people who are least able to afford to take on that liability, which is the small businesses." Even though SASCO Fasteners owner Steve Dunham takes big credit card orders, he isn't too concerned with liability issues. Dunham's customers are well known to him and most are large companies whose credit card data is kept on file. After dealing with a fraudulent out-of-state order years ago, he rejects large orders from unknown buyers. "We do a little bit of business with walk-in clients, but 90 percent of our transactions are over the phone and the billing is pre-authorized," he says. With banks no longer automatically on the hook to cover the costs, Carpenter anticipates a rise in litigation when fraud does appear. "When different parties are held responsible for the first time, obviously they're not going to be very excited," he says. "Due to the removal of the default bank payment, now there is more incentive to look at frauds and vulnerabilities." Reach reporter Greg Stiles at 541-776-4463 or [email protected]. Follow him on Twitter at  www.twitter.com/GregMTBusiness , on Facebook at  https://www.facebook.com/greg.stiles.31 , and read his blog at  www.mailtribune.com/EconomicEdge .   By Greg Stiles Mail Tribune MailTribune.com By Greg Stiles Mail Tribune Posted May. 24, 2015 at 2:00 AM » Comment or view comments Reader Reaction » STAY INFORMED Email NewsLetter Sign Up Today Sign up for our newsletter and have the top headlines from your community delivered right to your inbox. Southern Oregon Directory Featured Businesses Loading... 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