The Dangers of Swiping Chip Cards!

EMV Swipe the dangers of swiping a chip card

Even though chip cards have been the standard of electronic payment for a while, very few business owners actually understand the technology behind chip cards. Chip cards are not only more safe for your business, but also for your customers. It’s important to know that if you are still processing magnetic stripe cards, you are putting your business and your customers at risk. Hopefully, you’ve heard of the 2015 fraud liability shift, which places the blame on your business for all card-present fraud when accepting counterfeit magnetic stripe cards. The dangers of swiping chip cards instead of dipping them into the slot could cost you thousands of dollars. Remember, always dip the chip!

dip the chip the dangers of swiping chip cards

How Do Chip Cards And Strip Cards Differ?

Credit card transactions are divided into two categories:

  • Card-Present Transactions
  • Card-Not-Present Transactions

Card-present transactions mean the patron either swipes or inserts their card. Card-not-present transactions mean either the worker inputs the patrons credit card information manually, the transaction is completed over the phone or the customer completes the transaction online. 

Did you know that criminals are much more likely to try and get the credit card information of credit cards that are swiped instead of inserted? Magnetic stripe cards hold a combination of numbers in the magnetic stripe, making it easier for criminals to access that information. Chip cards, also known as EMV cards, use an encrypted code within the chip of the card, making it virtually impossible for others to obtain credit card information from one of your transactions.

What’s The Level Of Certification Of Your Terminal?

Some credit card terminals, even if they claim to be EMV, are not technically certified. The technology of the credit card terminal isn’t fully working, therefore, the register attendant requests for the customer to use the magnetic swipe feature instead of inserting their card. Even though all the pieces of a safe transaction are there, the business owner hasn’t quite put together the puzzle. This terminal may only be level 1 certified. The highest level of certification is 3. A level 3 certified terminal will have:

  1. The Hardware: You physically obtain an EMV capable terminal.
  2. The Software: The data written to facilitate transactions is working properly.
  3. The Brand: All major card brands are tested for safety using the terminal, and the application of a safe payment has been approved.

Why Are Chip Cards Better For Businesses?

Now that you understand why chip cards are more secure for cardholders, you may be wondering how that affects your business. Did you know that as a business, you risk incurring penalties for fraudulent transactions? These penalties include chargebacks, account suspensions and account terminations.
 

Bank-Initiated Chargebacks

As a business, one of the penalties you risk from fraudulent credit card activities is bank-initiated chargebacks. These can occur even if the transaction in question isn’t fraudulent. What happens is your customer’s bank notices a charge occurred at your business where the chip card that they issued to their cardholder was swiped. The bank can then initiate a chargeback without even contacting the cardholder. Banks have begun doing this at random to incentivize businesses to make sure that customers are dipping their chip cards instead of swiping them.

How Do You Process A Chip Credit Card?

As a business, it’s crucial to make sure you’re following fraud prevention guidelines and accepting EMV cards whenever possible. Abiding by these security guidelines will help protect your business and your customers, as well as prevent you from incurring any penalties. To process an EMV card, follow these steps:

  1. Always Use The Chip Reader
    • In today’s day and age, the majority of credit cards are equipped with chips. Make sure to ask your customers to always use the chip reader instead of swiping their cards if they have EMV cards. 
  2. Follow PCI Rules
    • The PCI, or the Payment Card Industry-Data Security Standard, has created rules for processing payments. These rules were put into place to help prevent fraudulent transactions. Make sure you are in contact with your merchant services provider so you understand the rules and maintain compliance.
  3. Use Current Software And Hardware
    • Different card readers have different advantages, disadvantages and security levels. It’s important to research your options to make sure your business is utilizing tools that will keep both your business and your customers safe.

Are The Dangers of Swiping Chip Cards Worth It?

As a financially savvy business owner, you should weigh the costs of different methods of processing transactions. Will fraud charges or an EMV terminal upgrade cost you more? What if your payment processor doesn’t offer level 3 certified terminals? What will happen to your business when banks stop making magnetic stripes on credit cards altogether? As a merchant services provider, PayFrog offers the best security solutions and current software and hardware technology to keep your business as secure as possible. Even though it may be a little unsettling to learn about all the risks associated with swiping chip cards, it’s important to remember that there are ways to protect your business. One of the best ways to protect your business and your customers is to utilize chip readers and make sure your customers insert their cards instead of swiping them. Plus, certain businesses can qualify for a FREE EMV Terminal upgrade!

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