The chips are down: New credit cards with computer chips are slow to catch on

By now, your bank has probably sent you one of the new credit cards with a computer chip in it. But have you tried to use it, by dipping the new card instead of swiping?

Good luck with that: Not many stores take it.

Unfortunately, that's today's typical American credit card: All dressed up, with only a few places to go.

Most of us now have at least one card with a chip in it, according to our research. In March, we surveyed 932 credit card holders in a scientific poll, and about seven in 10 had at least one chip card.

That's a big turnaround from six months ago, when we did a similar survey. Then, just 14% of cardholders had a chip card.

When you dip one into a chip-reading terminal, the chip generates a one-time number used for a single transaction. That makes them safer than the magnetic stripe cards that, using the same technology as a 1962 reel-to-reel tape recorder, use the same authorization code over and over.

The chip cards' shifting authorization number makes it harder to use the card fraudulently.

Trouble is, we're having trouble finding places to use them at all. The pace of banks issuing the chip cards is way ahead of the pace of merchants accepting them.

Statistics on how many merchants take chip cards vary, and it's an always-moving target, but only about one-fourth of merchants are actually processing payments with them.

In our reporting the story that went with our survey, we ran across lots of retailers with equipment installed, but not working. Some even had their slots taped over or deliberately jammed.

Why are retailers so slow to complete the loop and put the chip terminals into operation? It helps to understand the history.

Retailers and banks haven't been very chummy lately. They clashed ferociously over how much retailers should pay in "swipe fees" that merchants pay banks for every card transaction. Retailers came out ahead in the battle over debit card swipe fees, but the switch to chip cards created another friction point.

The switch took years to begin, since U.S. cardholders saw no reason to change. Banks were fine with that, too, as fraud losses were relatively low. They were willing to continue with the recording technology popular in Frank Sinatra's heyday — until credit card breaches started happening in rapid-fire succession and fraud losses rose. That prompted the banks to move.

They gave retailers until October 2015 to add and turn on the new processing equipment, enforcing the move with the promise to shift liability for some fraud to the retailers that didn't make the switch.

It worked — sort of. Retailers bought new chip-reading machines, installed them, but never switched them on.

Walk into any mall in the country and you'll see chip readers in stores, with their slots taped over or with cards jammed in to them to prevent their use. Industry experts estimate that 30% to 45% of U.S. merchants have installed, but unused chip readers.

Mansour Karimzadeh, managing director and chief technology officer for the SCIL-EMV Academy, an EMV education firm in Toluca Lake, Calif., estimates that about 30% to 45% of merchants have the new terminals but are not using them.

One reason they're not in use: Merchants aren't eager to spend additional money for training their staff, or for the fumbling of customers in line. Easier, many figure, to let time pass, and let customers get used to the new cards on someone else's terminals.

In other words, let other merchants do their training for them.

Another reason is that customers perceive the cards are just slower than the old mag-stripe cards: A quick swipe and the card is back in their wallets.

Visa finally took a step to help merchants when, on April 19, it released a free software upgrade for terminals that let customers quickly dip their chip cards in the terminal and take them out two seconds later, instead of waiting through the entire processing time.

If that catches on, the finally a dip will become the equal of a swipe, and our cards will have someplace to go.

Daniel P. Ray is editor in chief of credit card comparison site CreditCards.com