March 23, 2015

US Credit Cards Set To Change – Is Your Business Ready?

Square-credit-card-reader-for-iPhoneAbout 9 months ago I went to France with my parents.  We toured Provence which basically meant eating our way through the beautiful, lavender-covered countryside.  When not eating amazing warm baguettes or drinking wine with lunch (it was hard to stop that habit when I returned to the US!), we were driving from quaint medieval town to quant medieval town.  With all that driving, we had to stop for gas and at one station we couldn’t for the life of us get the credit card machine to work for us.  

“Go inside and ask them what’s wrong,” my dad insisted.

Now, I took French for about 11 years but it’s been almost twice that since I last used it and to say my French is rusty is an understatement.  It took a bunch of back and forth and several animated hand motions before the station attendant broke it down for me as simply as he could:

“Votre card est American.”   Your card is American.

No, this wasn’t him just being stereotypical French – he was being genuine.  Our credit card was American and for that reason it didn’t contain what’s known as EMV technology (also commonly referred to as a smart card or chip card).

Whereas here in the US we have a magnetic strip on the back of our credit cards that is swiped when we make a transaction, in other parts of the world the credit cards have a chip embedded in them.  This chip actually makes the card safer as when it is ‘dipped’ (the terminology instead of swiped), it creates a one-time transaction code that can’t be duplicated.  This makes it significantly harder for a hacker to steal credit card data and use it fraudulently.

In fact, here’s a stat that may astound you – even though the US is responsible for only about 1/4 of all credit card transactions in the world, 1/2 of all credit card fraud takes place here.  This happens to big and small companies alike as recently the likes of Target has been in the news for their data breach (they just announced that they’ve come to a settlement to pay consumers impacted by the breach $10 million).

For this reason, credit card companies in the US are now bringing us up to speed with the rest of the world with a goal date of October 2015 for the conversion to chip cards.   So what do you, as a small business owner, need to know?

  • While many cards will initially have both a magnetic strip and chip technology so that they can be read by current payment processing terminals, you may choose to upgrade your processing terminal.  The reason is that by upgrading you are less likely to be held liable if credit card data is stolen by hackers.  Companies like Square – the mobile payment processing terminal used by millions of small businesses – has a new EMV reader that you can preorder for $29.  PayPal will also be launching a mobile EMV-compatible terminal soon – while information for their US version doesn’t seem to be posted yet, you can click here to learn more about ‘PayPal Here’ for the UK.  If you use another provider for your payment terminal (either in store or mobile), check with them about any necessary upgrades you may need to make.
  • If you accept American Express, you may be eligible to get a $100 American Express gift card to help you offset the cost of upgrading your point of sale technology.  Click here for more details.
  • How will the EMV technology impact online transactions?  If you sell any products online this is probably a question you have.   According to experts, in the near term there won’t be any changes necessary for online transactions but the day may come where consumers put in a pin along with their credit card information so you may need to adjust your payment pages in the future.

Lastly, from everything I’ve been seeing, knowing how to use these cards – how to ‘dip’ them may take a little bit of practice so be sure to take some time to learn how use them (and train any staff you have) so that you can continue to quickly and easily serve your customers with a smile.

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