How Much Does it Cost to Upgrade my Credit Card Machine to be EMV Chip-Enabled?

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Europay, MasterCard, and Visa chips, commonly known as EMV chips, represent the latest effort toward reducing credit card fraud. Every consumer with a debit or credit card should already have his or her replacement card, and a great number of merchants have made the switch to credit card machines with EMV chip-reading capabilities.

Of course, while the consumer need only get used to pushing the card into a slot, the change requires a bit more from merchants. You have new technology and processing systems to install and maintain, and new liability compliance guidelines.

And, of course, there's the cost. Luckily, you can reduce the pain of the EMV chip upgrade by increasing your knowledge about the shift, and the costs to upgrade versus the cost of not upgrading.

Why the Shift to EMV?

After Europe moved to EMV chips, the U.S. decided to make the switch for a simple reason: fraud.

Nearly half of all credit card fraud happens in the U.S., even though its consumers only account for about a quarter of credit card purchases. Part of the reason for this is the simplicity with which criminals counterfeit those magnetic strips.

The chip in an EMV card is far more secure, since it's actually a very small computer, making it extremely difficult to counterfeit. The chip transmits encrypted data during a transaction. This encryption means that, even if a hacker accesses the transaction, he or she can't use the information.

With magnetic strip cards, banks used to assume the cost of someone using a fraudulent card. However, with the EMV chips, the banks no longer absorb these costs. If someone uses a fraudulent card on your non-EMV machine, the bank leaves you with the bill.

Cost of Upgrading

The terminal alone costs about the same as current credit card readers. The extra cost is the technology and certification behind the terminal. On average, EMV-enabled terminals cost between $500 and $1,000 for a ready-to-use machine. For mobile payment devices, upgrading to the new device costs around $49 for Android and iOS.

If you use an integrated POS terminal, you're looking at substantially more, depending on the complexity of your system, such as inventory management and customer statistics. This type of system may run you thousands, but it's still about the same price as the old machines.

The Price of Not Upgrading

Financial companies absorbed the cost of issuing millions of chipped cards (around $3.50 per card) in order to fight credit card fraud. The main cost to the merchant who chooses not to upgrade is the fact that banks no longer absorb the cost of fraudulent cards. The thinking behind this is that merchants had the opportunity to upgrade and help fight fraud. Choosing not to makes them liable for any fraud that occurs.

Most large businesses already made the upgrade. This means that criminals who use counterfeit cards are taking their "business" to the smaller merchants who still employ magnetic stripe readers. These businesses may have felt little need to perform the upgrade, due to not having fraud issues in the past. In this new landscape, though, they may now need to worry about the cost of fraud.

Where to Buy

You can start by talking to the vendors who initially set up your current system. Look at your equipment and decide whether it's meeting your needs. If so, a simple switch is likely all you need to do, and your costs remain low. However, if you were considering upgrading to equipment with more capabilities, such as adding a customer loyalty function, this may be the perfect time to make this type of switch. This may also be the perfect time to add mobile payment options, if you don't already have this capability.

Your Bottom Line

Making the switch to EMV chip-enabled credit card machines is not required and you face no fines for failing to do so. However, you do increase your liability as regards fraud, since banks and other credit card issuers will no longer assume financial responsibility for fraudulent charges as they did with magnetic stripe cards. Add to that the fact that people using these counterfeit cards only use them in facilities without chip readers, and your liability goes even higher.

To learn more, talk to your payment processor and/or merchant acquirer. They can work with you on making a smooth transition. If you have misgivings about your current providers, this offers the perfect opportunity to take your business elsewhere.

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