Local credit unions issuing new, safer credit cards this summer

The credit cards in your pocket may still be years away from their expiration dates, but chances are your bank or credit union will be sending a new card by late summer, if they have not done so already.

Financial institutions large and small are working to comply with new mandates requiring the new ‘smart chip’ or EMV technology embedded in ATM, debit and credit cards.

Lancaster-based Founders Federal Credit Union has already started rolling out the new smart chip cards to its 100,000 credit cardholders.

Rock Hill-based Family Trust will roll out its smart chip cards to about 11,000 credit cardholders this summer.

“The mailer that comes with the card is going to be colorful and flamboyant so it will catch people’s eyes,” Ryan Harvey, Family Trust’s Electronic System and Delivery manager said. “Hopefully our members will look at it and understand how the cards are different.”

The size of smart chip cards will not change and the magnetic stripe on the back of the card — first developed by IBM in the 1960s — will remain, at least until 2017.

The major change, Harvey said, is the transfer of liability for fraudulent card use from the card issuer, typically your financial institution, to the merchant starting October 1, 2015.

Under the new rules, “if the merchant takes EMV (the smart chip card) they are not liable for any fraud on the card,” Harvey said, which is typically how companies like VISA and MasterCard handle fraud today using magnetic stripe technology. But after October 1, “if the merchant is not EMV-enabled and we (the issuer) have issued an EMV card, the merchant takes liability or this transaction.”

Simply put: If there’s fraud involved, the merchant has to stomach the financial loss.

While merchants will soon have a financial incentive to upgrade their point-of-sale equipment and card readers, educating cardholders who bear little responsibility for fraudulent activity will be more of a challenge, said Founders vice president for marketing Nikki Nash.

“Any time there’s a change I think you get some push back from people,” Nash said. “But this is a great change and a great move in the right direction.”

New smart chip cards cost about $3.50 to produce, while credit card terminals designed to accept the smart chip cards cost about $500.

Nash and her team have already rolled out the smart chip cards to select cardholders, starting with customers who are frequent travelers.

“This has been already in place [overseas] for a while now, so our travelers will understand it quicker than others,” she said.

Family Trust is running a pilot test with about 20 employees before rolling out new cards to its members.

At the cash register, card issuers will determine — in advance — their preference for authenticating and approving financial transaction. The card reader and smart chip will agree on a cardholder verification method which may include a signature, an encrypted PIN, or for some smaller or low-risk transactions, no signature at all, according to VISA’s Merchant Acceptance Guide.

“Its almost impossible to commit fraud with or duplicate [the cards],” Nash said. “It’s going to be really great for our members to offer the security for these cards.”

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