“I know the new debit cards are coming, but… why the change?”

Over the past couple of years we have written several articles about debit card and ATM fraud. In fact, in 2009 financial institutions reimbursed over $142 million to victims of debit card fraud. The new ‘chip’ debit card is part of the evolution of the international electronic payment system as it continues to improve technology and reduce fraud.

What is the chip?

Many of you will have already received a credit or debit card from another financial institution and will be familiar with the chip. For those of you who have not yet received a new chip card, when you do, you will notice a small square on the left hand side of the front of the new card. That little square is actually a computer chip which is embedded into your card.

What’s the big deal?

The big deal is the enhanced security offered by the chip technology. The chip itself is extremely difficult to duplicate which means less chance for fraud and greater protection if your card is lost or stolen. This chip not only stores data but also improves how the card actually processes transactions by completing a number of security checks between the card and the ATM/Point-of-Sale (POS) terminals to make sure the card is valid. The chip technology in conjunction with the Personal Identification Number (PIN) protection brings a new level of security to your card.

When will you get your new card?

The change to the new chip technology across Canada will take years as all financial institutions and merchants will have to update their machines and systems. All Canadian ATMs will accept chip cards by December 31, 2012 and all POS terminals will be converted by December 31, 2015. After these dates the black magnetic stripe on the back of the chip card will no longer work in Canada.

When The Credit Union sends out new chip debit cards, we will include a letter explaining how the new card will work and what if any changes there will be. Keep checking the website and newsletter for updates.

How will the new card work?

When you use your new debit card at a chip enabled POS terminal rather than swiping your card through the reader you will insert your card into the terminal. Your card will stay inserted until the transaction is complete. You will continue to follow the same prompts and enter your PIN to verify the transaction. Once the transaction is complete you remove your card. Since it will take years before all POS terminals are converted to the new technology your new debit card will still function using the magnetic stripe on the back.

If you are unsure whether an ATM or POS terminal is chip enabled you can swipe your card as usual. If the ATM or POS terminal is chip enabled it will recognize your card as having a chip and will prompt you to complete the transaction using the chip and not the magnetic stripe.

Even after the new system is in place we will continue to produce cards with a magnetic stripe on the back so you will be able to use your debit card at merchants and ATM machines in countries which have not yet adopted the new technology.

What about security with magnetic stripe cards?

Magnetic stripe transactions used in conjunction with PIN protection are still very secure. In fact, 99.99% of transactions are without incident. The Canadian payment system is very safe and moving to chip technology makes it even more so. Not only will transactions be more secure, but the added benefit is fraudsters typically leave the countries where chip technology is used before they “go out of business”.

As your financial advocate The Credit Union is committed to protecting our members’ money. Our introduction of this next generation of debit card technology will enhance our security and help us in achieving this goal. If you have any questions about the chip card please give us a call, drop us a line or come into a branch. We C.U.™ so you can feel secure.