Consumers may not hear ‘swipe your card’ for long

NEW YORK (AP) ? Swipe your card and sign. It’s a reflex that credit card holders may soon have to suppress at the register.

Visa announced this week that it will take measures to speed up the transition to cards that use a computer chip, rather than the magnetic strips on most cards right now. The chip technology significantly reduces the potential for fraud and facilitates contactless mobile payment options that let users wave cards near the reader to pay.

A big part of Visa’s challenge is getting merchants to install new terminals than can read chip-based cards.

Here’s what you need to know about Visa’s announcement:

Some Background

Chip-based cards are already widely used outside the United States, particularly in Europe. The cards have chips on the front and are inserted into a slot, unlike magnetic strip cards that are swiped. That’s why Americans sometimes encounter problems when using their cards abroad.

The transition to the new technology at home has been difficult in part because there are so many card issuers in the United States. But now Visa says it will take steps to get the banks, credit unions, payment processors and merchants to convert.

Starting in 2012, for example, merchants that show they’re widely using terminals that accept the more fraud-proof cards will no longer have to submit to an annual audit required by Visa. This will be a strong incentive because the audits to check for fraud can be costly for merchants, notes Randy Vanderhoof, executive director of the Smart Card Alliance, an industry trade group.

By 2013, companies such as First Data, which help process payments, will be required to have the capability to process chip card payments. And by 2015, banks will have their fraud liability limited on cards that use chip technology.

When to Expect Changes

Banks will likely start phasing in the new cards over the next couple years as they replace expiring cards, according to Vanderhoof

Some card issuers are already rolling out the new cards for customers who travel frequently. Chase, for example, in June became the first major U.S. bank to make a card with the chip technology widely available. U.S. Bank and Wells Fargo this summer also rolled out chip-based cards to select customers and plan to expand the offering in the coming year.