The typical credit union member has one or more credit cards and a debit card.
In mid- to late-2015, cardholders likely received at least one chip-enabled Europay, Mastercard, Visa—the EMV acronym comes from the companies' names—replacement credit card. Members with SmartPay Cards also likely received an EMV credit card in 2015.
However, the issuance of chip-enabled debit cards has lagged behind credit cards. That's because the Durbin Amendment to Dodd-Frank requires debit card issuers to offer at least two unrelated network routing options for merchants, while credit cards require just one. That debit card requirement means it took longer to develop a chip that could support multiple options, because writing, testing and certification are more complex.
How EMV Works
Personal information on a traditional, magnetic-strip credit card is static and can be easily counterfeited. Once that information is copied and replicated onto another card, a fraudster uses the replicated card to steal cash or make purchases. Traditional credit card holders often are unaware their personal information has been compromised until fraudulent charges appear on their monthly billing statements or a credit card company contacts them, requesting certain charges be validated. EMV technology evolved in hopes of reducing fraud stemming from the theft and replication of this information. While EMV technology will not prevent data breaches, the technology makes it much harder for criminals to profit by creating counterfeit cards.
EMV encryption chips are hidden in the silver emblem on EMV-enabled cards. When used at EMV-capable retailers, the chips encrypt the payment and personal information involved in the transaction before interacting with the proprietary technology that works to decrypt such transactions. That makes it extremely difficult for thieves to duplicate the card.
Liability for counterfeit cards shifted for EMV on Oct. 1, 2015. Since then, the liability in a fraudulent card transaction could be with either the merchant or the card issuer, rather than primarily with the issuer. With the shift, in the case of a fraudulent transaction, liability depends on which party—the merchant or the issuer of the card—is least compliant with EMV requirements. There are some exceptions for certain industries. Visa cards allowing ATM transactions do not shift liability to the ATM owner until Oct. 1, 2016. Fuel companies and MasterCards used at ATMs have until Oct. 1, 2017, to upgrade terminals.
Consumers are generally protected from fraud regardless of the type of card they use. However, it is important for consumers to be vigilant and act quickly in the event of debit card fraud, as their liability generally ranges between $50 and $500, depending how long it takes them to report fraudulent charges to their bank or credit union. They could be on the hook for all fraudulent charges on a debit card if they report fraudulent charges more than 60 days after the charges show up in their statements. With credit cards, the Truth in Lending Act limits liability to any fraudulent charges to $50.
American retailers accepting EMV cards often do not require a personal identification number, but foreign retailers typically utilize chip-and-PIN cards. American travelers abroad can encounter difficulties making chip-enabled credit card purchases. Therefore, U.S. travelers should be prepared to spend extra time in check-out lines. There are no guarantees you won't run into problems with foreign merchants, but if your card has an EMV chip and you know your PIN, you've reduced your chances of running into difficulties at some foreign payment terminals. If you're traveling abroad, always notify your card provider in advance to verify foreign use.
NCUA Communications on EMV
EMV cards are expected to become much more mainstream over the next year or so. NCUA has provided grants to eligible credit unions that can help them upgrade existing credit and debit cards to EMV. NCUA's Office of Consumer Protection reminded credit unions to educate their members on the features and benefits of EMV cards in an article in the June 2015 edition of The NCUA Report. The agency also is planning to release an instructional YouTube video on EMV technology.