A New Era of Credit Card Acceptance is Here: Stop Accepting Magnetic Stripes in 2024

By Merchant Advocate

Nowadays, it’s all about that chip, commonly known as the EMV, for Mastercard, Visa and Europay—the companies that rolled out the technology stateside in 2015. It generates time-sensitive authentication codes for every transaction, adding a layer of encrypted security that helped bring down in-person counterfeiting by more than 76%.

In 2021, Mastercard officially announced a phase out of the magnetic stripe format over the next decade to provide better security and fraud prevention. The other credit card brands followed suit shortly thereafter. Tapping cards and using chip readers are now the most prevalent methods for paying with plastic.

What Does this Mean for My Business?

Processing Fees

What does this change mean for businesses accepting credit cards? For one thing, it means every swipe now comes with an avoidable fee. In their quest to phase out the magnetic stripes, processors are now assessing an EMV non-acceptance fee for those who do not accept chip cards. Merchants must upgrade their terminals to accept EMV chip card transactions.

Transaction Security

Stripes contain a myriad of sensitive information including the cardholder’s name, card number, and verification numbers, with no encryption. Over the years, this vulnerability has resulted in billions of dollars’ worth of chargebacks and fraud, including the large-scale spread of “skimming” card scams. Meanwhile, sophisticated hackers have found endless ways to exploit outdated magstripe cards, even infecting corporations’ credit card terminals with viruses to gain access to customer data.

What is a Magnetic Stripe Card?

The ubiquitous “magstripe” credit card from brands like Visa, American Express, Mastercard and Discover has a silver or black magnetic stripe on the back of it. An advent largely credited to IBM, the magnetic stripe has been a fixture of credit card transactions as far back as the 1960s. This stripe contains essential account information like the card number, expiration date and other issuing bank data.

When a customer swipes the card through a card reader, the information is read magnetically, allowing transactions to be processed. This single advancement catapulted the use of credit cards as everyday tender for all types of monetary transactions and changed our relationship with spending forever.

Do EMV Cards Have a Magnetic Stripe?

Despite the timed phase-out, many EMV credit cards still contain a magnetic stripe. Because not all card readers support EMV chip technology, this is still necessary as the transition to chip technology is still ongoing. The magnetic stripe serves as a secondary backup for processing transactions when chip readers are not available, often in the form of MSD (Magnetic Stripe Data) contactless payments.

When Will the Magstripe Go Away for Good?

By 2033, the antiquated magnetic stripe will have seen its last sunset with the United States expected to go completely magstripe-free by 2027. And while other security measures such as biometric markers including fingerprints and face recognition have been tested across the world, replacing hundreds of thousands of POS machines in the United States will be slow going.

Is Your Business Being Charged for Magnetic Swipes?

If you’re not sure how to check if your machines are updated to satisfy new EMV requirements, you’re not alone. Credit card processing statements are coded in ways that can mystify even the best accountants making it difficult to ascertain if you are complying. That’s why it helps to have an advisor like Merchant Advocate, who can help decipher your statements and advise you on any point of sale or other changes needed for compliance, as well as negotiate your rates and monitor merchant service accounts monthly. They work in real time to find overcharges and other errors, helping you to keep your profits.