A survey by ConsumerWorld.org of four dozen national and regional retailers reveals that while virtually all have installed checkout terminals with slots to read smart credit cards with embedded computer chips, three-quarters of them have not yet enabled the technology chainwide.

Credit card issuers established an October 1 deadline for stores to begin accepting these so-called EMV cards which help reduce credit card fraud. While the rules vary among credit card brands, generally, if a store fails to process a transaction using the new, more secure system when a chipped-card is presented, it will be bear the financial liability for any fraud losses. Previously, card issuers were responsible.

To use a chip-card, rather than swipe, shoppers insert or "dip" their credit card into a special slot in the retailer's checkout card terminal that authorizes the purchase. Chipped-cards help prevent the use of counterfeit credit cards by transmitting a unique code for each transaction.

"It's seems crazy that millions of dollars have been spent to issue chipped credit cards and to install special card readers, but shoppers' security is no better than it was before because the systems haven't been enabled yet by most retailers," commented Consumer World founder Edgar Dworsky. "It is also frustrating and confusing for shoppers who see the new terminals but don't know whether to swipe or 'dip' their credit cards."

The 48 retail chains surveyed were questioned, or observed via in-store spot-checks, between December 1 - 5. All of them except Radio Shack had payment terminals equipped with card slots for chipped cards, but three-quarters of those stores didn't have them working yet. (See chart.)

Only 11 chains in the survey have enabled the system chainwide* and are processing payments using chipped-cards: Target (all stores), Walgreens (all stores), Home Depot (all stores), Rite Aid (all stores), Macy's (all stores), Best Buy (all stores), Walmart (all stores), Sam's Club (all stores), Lowe's, Old Navy, and Office Depot/Max. (* The latter three had the system enabled in at least the test stores checked but did not respond to the survey.)

Among the 75 percent of retailers that have not yet enabled the chip technology chainwide are Sears, Kmart, Costco, Michael's, Toys 'R' Us, Bed Bath & Beyond, T.J. Maxx, Marshalls, Sports Authority, Foot Locker, Whole Foods, Stop & Shop, Petsmart, Kohl's, Staples, Safeway, Kroger, and CVS (which expects full operation by the end of the year).

Why aren't stores with card-slot-equipped terminals actually using them? According to one large chain that has fully implemented the system, it is a very complicated and expensive process to get a store's system to properly interface with all the credit card networks. Others provide various reasons: they are still testing the software, stores got specifications late from some of the card networks, some card networks are slow to certify retailers' systems, stores don't want to make system changes during the busy holiday shopping season, some need to change the module inside the card-slot reader, and some say that they are only partway through rolling out the system to their stores.

In addition, there has been controversy surrounding the introduction of chipped-cards. Transactions take longer to process. Some retailers question the security provided by the new system with respect to protecting card data from hackers. And banks have been criticized for only requiring a signature rather than a more secure PIN number when using these cards. Some large retailers like Target, as well as a group of state attorneys general are urging the adoption of both "chip and PIN" when making a purchase. On the other side, some have argued that it is too difficult for shoppers using the new cards to remember to both dip them and to also enter a PIN number.

Bank industry analysts estimate that 70% of credit cards will be chip-enabled by the end of the year. Stores which have not yet updated or turned on their systems can still accept chipped credit cards the old-fashioned way -- by swiping.

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