News Flash! Phone Chip Readers Are Here--And So Is Liability When You Sell Handmade Jewelry


    by Cathleen McCarthy, Contributor to Lapidary Journal Jewelry Artist magazine


    If you accept credit card payments when selling handmade jewelry, you may have heard the term "liability shift" in recent months. Well, the shift happened on October 1. In other words, it's happening!


    Concern about the increase in credit card fraud is a major reason U.S.-based card issuers, financial institutions, and retailers set a deadline of October 2015 to put an EMV (chip) payment system in place. That's when liability for counterfeit fraud shifts from card issuers to merchants if their equipment does not support EMV.


    If you are a seller who accepts credit cards, this applies to you.



    What is EMV? Europe began introducing chip cards soon after 2002, when EuroPay, MasterCard and Visa collaborated on EMV, the global standard for chip technology. While magnetic stripes offer the same data every time you make a purchase, chip cards encrypt different data for each transaction, making them harder to clone or use fraudulently. I've written in-depth about this here and here.


    Given that the U.S. is one of the last first-world countries to migrate to EMV--and the largest--it's attracting lots of fraud. Scammers look for the easy mark, and we're it.


    Most retailers have been putting safeguards in place and installing chip card readers at point-of-sale for months, even years. You might be caught off-guard, however, unless you've been reading those updates from Square and PayPal.


    What does this shift mean for you exactly? You may be asked to process both chip and mag-stripe cards if you are selling handmade jewelry at craft or trunk shows. If you use these new readers, the issuers of the readers will take on the liability for fraud. Here are two options available to you.


    1. If you use PayPal's payment system, you can order their new chip card reader for $149 with a $100 rebate to your PayPal account if you process $3,000 within three months. Their reader accepts magnetic stripe, chip, or contactless payments (swipe, insert or tap).


    2. If you use Square , you have two options for processing EMV payments. Square's chip card reader costs $29 and accepts both magnetic stripe and chip card payments. Or you can keep your old swipe reader handy and add the newest Square device that processes both chip and contactless payments via Apple Pay for $49, refundable as a processing credit.


    Should you be worried about liability for fraud? Not if you're using a proper chip reader, according to Square. (PayPal declined an interview for this article.) Ironically, the transition to chip is what's putting independent sellers at risk for the moment.


    "The only time fraud and liability land on the independent business owner now is if someone comes in with a chip card that is counterfeit, and you swipe the magnetic stripe of that card on your computer without a new reader that accepts that technology," says a spokesman for Square.


    The Good News: Square and PayPal promise to take on the liability of any fraud that occurs during a transaction using their chip readers.


    If you're like me, your credit cards have been quietly reissued with these little embedded chips--but with that old magnetic stripe still on the back. And, as of this moment, most stores are still asking me to swipe, not insert. I suspect we're going to see big changes at the register in the near future.


    Card issuers are always right on top of fraudulent card use, in my experience, but as a seller you're vulnerable on the front and back end when selling handmade jewelry. I strongly recommend taking advantage of the offers in place right now. I will be writing about this in greater detail on The Jewelry Loupe and in the January/February 2016 issue of Lapidary Journal Jewelry Artist.


    In the meantime, be safe--and keep your customers safe! --Cathleen