How your credit cards will change starting next month

The “dip” is set to replace the “swipe” in credit-card transactions in the United States. 

Starting Oct. 1, EMV smart cards will be the norm in the US. The cards, which draw their name from the companies to first adopt the technology (Europay, MasterCard, and Visa) will be read by an embedded chip rather than a magnetic strip. Most new credit cards already have the silver square chip near the front of the card, but banks and credit-card providers that have not already switched will be rolling out chipped cards soon to comply with the new system.

For consumers, the switch has few effects. Credit cards will be dipped, like at an ATM, rather than swiped when purchasing goods in the store (there will be no changes to using the cards online). Dipping the card will allow the new card terminals to read the chip at the end of the card. The dip and chip will mean that in-store purchases with credit cards will be far less vulnerable to data theft than their magnetic strip counterparts, according to advocates of the new technology.

"The principle thing that EMV chip cards do is address counterfeit fraud," MasterCard product expert Carolyn Balfany told Business Insider. "The new process makes it almost impossible for fraudsters to create fraudulent or counterfeit transactions."

The chief cost to consumers will be convenience. The new dipping method will take longer for the card to register – five to 10 seconds longer than swiping. There is also likely going to be confusion during the transition process. Stores slowly will be switching to the chip system, but some might only have terminals that read magnetic strips. New EMV cards will still have magnetic strips in order to accommodate the transition period.

“Carrying around a wallet full of EMV chip cards and finding a merchant that will accept them reminds me a lot of (Marco Polo),” Randy Vanderhook, executive director of the Smart Card Alliance, wrote in a letter to the industry association this summer.

In exchange for such delays, the EMV cards are offering fewer fraudulent charges and other small benefits – for example, the new cards will likely last longer before they expire, due to safer transactions and banks being less liable for fraud. The EMV cards will also make traveling abroad more seamless for American travelers, as the US is the last major developed country to adopt the system.

Businesses, unlike consumers, will experience the bulk of the inconveniences. The new rules for the EMV system will mean banks and credit-card providers who comply will no longer be expected to pay for fraudulent charges. The costs will go to the weakest link in the chain – stores that don’t have terminals to read the chips, according to the San Diego Union-Tribune.

While retail giants like Target, which already spent $100 million revamping its pay system, have the money to buy new terminals and train customers, many small businesses don’t. And those small businesses will be vulnerable.

“Everyone in the industry is aware ... that small businesses will be the last to upgrade their equipment. Everyone knows fraud will migrate to small businesses, because that’s the place where criminals will be able to use counterfeit cards.” Avivah Litan, a security analyst at Gartner who studies EMV issues, told the San Diego Union-Tribune.

A September Congressional Research Service report places the total cost of the US card switch in the billions.