ATMs to take ‘chip’ cards, or else

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MasterCard announced recently it is going to ratchet up pressure on ATM owners to upgrade to machines that can read EMV-enabled cards. If you’re not familiar with EMV, it’s a technology standard that ups debit card security by incorporating a tiny chip into each card issued to users. That chip makes it harder to create counterfeit cards using stolen payment information, a popular tactic among thieves.

Under the MasterCard rules, ATM operators that don’t install EMV-compatible machines by October 2016 will have a greater share of the liability for fraud that occurs on those machines using MasterCard-branded products. Essentially, operators will have to upgrade or pay a much greater share of the losses from fraud.

This has a couple of ramifications for debit card holders, who have a pretty big stake in card security, because consumer protections for debit cards are relatively weak.

Unlike with credit cards, if consumers fail to report debit card fraud fast enough, they face having to pay an increasingly large chunk of fraud losses. Plus, even if you do report debit card fraud with plenty of time to spare, you may still have to deal with significant financial hardship while the matter is resolved because of the way debit cards pull cash directly out of your checking account. So, if EMV adoption can cut down on the fraud, it stands to reason that debit card users will be better off.

The downside for customers is that there will be a huge tab for ATM operators to install the new EMV technology, and that tab will likely be paid by ATM users, in the form of higher fees.

What do you think? Are debit cards in need of a security upgrade?

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