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Chip-and-PIN: What Does the Oct. 1 Credit Card Deadline Mean For Me?

It's all part of a nationwide shift in the way we pay, with the goal of beefing up credit-card security.
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Like many Americans, you've probably received a new credit or debit card at some point in the last few months with a computer chip embedded.

These new "chip-and-PIN" or "chip-and-signature" cards are all part of a nationwide shift in the way we pay, with the goal of beefing up card security. And retailers are buzzing about it this week because they -- not credit card issuers -- will be on the hook for fraudulent charges starting October 1 if they don't upgrade their payment systems.

For consumers it'll be a change at the cash register, but it won't happen overnight. Here are the basics on these chip-and-PIN cards.

What does the embedded chip do?

The new "smart" chip cards use EMV (which stands for Europay, MasterCard and Visa) technology, which generates a unique code every time the card is used. These EMV cards have been around since the 1990s, and much of Europe and the U.K. already uses them.

No technology can prevent all fraud, but the smart chips are more secure than the traditional magnetic-strip cards. First, it's harder for fraudsters to make a fake physical card. Secondly, even if the bad guys get a hold of the transactional code, it's worthless because it works only one time -- it would be like getting their hands on an old password that's no longer valid. (EMV won't change the way you buy things online, but also won't address the theft of any card information you type in there.)

Will this change how I pay at the register?

The process is a bit different: Forget the swipe and learn to dip. Rather than swipe a magnetic strip through a payment terminal, shoppers "dip" the card by inserting the chip end for several seconds and complete the purchase with a signature or a four-digit PIN. Overall, the transactions can take a few moments longer to process than they did with the strip cards.

Read More: Credit Cards Now Come With a Chip Embedded

Will everything change overnight?

Put simply: No. EMV represents a major shift in the payment system, and experts have long warned that the rollout will be slow on both the consumer and retailer sides.

So don't worry if your card issuer hasn't sent you a new chip card. You're hardly alone: In fact, six in 10 U.S. credit cardholders still don't have chip cards, according to a report released Wednesday. Your old magnetic-stripe card will still work in the new payment terminals, and you'll likely receive a chip card over the next few months.

For retailers -- who may have to shell out $200 to $1,000 per new payment terminal to handle the chip cards -- it's a big, expensive change. Various recent surveys have said anywhere from 60 percent to 90 percent of merchants don't have the new payment terminals installed. While most big-box retailers will likely have upgraded, some mom-and-pop shops think it will be cheaper to eat the costs of fraudulent charges rather than buy new terminals.

Read More: Hilton Hotels Looking Into Possible Data Breach

So, what exactly happens on October 1?

The merchants -- no longer the card issuers -- will be responsible for fraudulent transactions if they don't upgrade their payment terminals. If you are a victim of card fraud, though, the complaint process won't change. You'll still call the number on the back of your card and talk to your bank.