Meaning of liability shift

Liability shift is a way for card associations to reduce card fraud. The associations (Visa and MasterCard) insist on card companies issue cards that are chip cards. Chip cards are also referred to as smart cards. The information for the card account is held in the chip with a default for magnetic stripe.

With liability shift, associations like visa and MasterCard have insisted that card manufactures, card issuers and card acquirers get certified for EMV. All card participants must get on board and different regions all have different dates by which they have to have been certified. Banking in Kenya has also been affected by these developments in liability shift.

EMV certification is a very technical and expensive exercise. Most countries in Africa have missed the deadlines or will miss the deadline due to lack of capital resources to have EMV certification.

How liability shift works

Liability shift is a tool that is being used by the associations to ensure that the card industry is EMV certified which will reduce card fraud. The liability for fraud on a card is being shifted from the merchant to the issuer and acquirer. Where an issuer has give cards that are EMV or chip, these cards use Personal identification number (PIN) to verify card transactions.  Where a chip card has to default to magnetic stripe because the merchant POS or ATM is not EMV certified, the card transaction is verified using signature on a paper receipt.

Signature is less secure than PIN because the signature is not verified at the cardholders account level on the card management system. Pin verification means that the PIN keyed on the POS or ATM is verified by the card management system. Where the PIN is wrong, the transaction will not be authorised. Charge backs for EMV cards will be allowed for most reasons where the merchant is not ENV certified.

How liability shift affects you

As a individual cardholder, the liability shift does not affect you. If you have a corporate card, the liability shift migration does not affect you either. As a card issuer, if your cards are not Chip, you will have a problem of having merchants that accept your cards because merchants will not want to accept card transactions from non-EMV cards. As merchants and Acquirers, liability shift is very important because if the POS and ATMs are not EMV certified, charge backs on transactions become the responsibility of the Merchant or acquirer.

Issuers, acquirers and card processors must ensure that they comply with the associations to become EMV compliant within the given time frames. Failure to comply will mean losses as the liability shift for charge backs will act as income leakages leading to failed, bankrupt and closed card companies.

Reasons why people get into credit card debt

credit card debt

Many people at one time or another get into credit card debt. There are many reasons why people get into credit card debt among them:  job redundancy, shopping sprees, illness in the family and unplanned spending due to peer pressure.

11 steps to get out of credit card debt

1. Consolidate thecredit card debt especially if you have more than one credit card. This makes it easier to pay off the debt.
2. Do not carry your card with you if it is to be used as an emergency card.
3. Do not continue to use the credit cards but use cash. If possible, cut up the credit cards to remove temptation. Cash is easier to monitor than when a credit card is used.
4. Pay off all the small credit card debt. This will consolidate more money to be paid off in higher amounts to credit card debts which are more.
5. Get a loan from your bank to pay off your credit card debt. It is cheaper to pay off the loan than credit card interest which is usually very high. Sometimes the credit cards companies assist the cardholder to repay the debt by rescheduling the debt. Rescheduled repayments sometimes attract less interest, but the card account has to be declared delinquent.
6. Avoid all unnecessary fees and charges levied on the credit cards. There may be fees for making late payments or paying less than the minimum required. These should be avoided since these fees and charges carry compounded interest
7. Make a payment plan for all your credit cards. When one card is fully paid, close the account. Do not use the money that was being paid to this card as extra spending funds but add it to pay off the next card.
8. The cardholder can consider getting a credit card that charges less than the card they have. This option may mean moving from one credit card Company to another to get out of credit card debit
9. One should consider getting out of credit card debit by getting a debit card. The debit card may be mapped to only one current account and no access to the savings. This helps the cardholder to save up the money in a separate bank account and this will be paid to the credit cards.
10. Make payments that are more than the minimum requirement from the card company. Avoid making just the minimum payments and reduce the interest charges.
11. Make payments the day after the statement has closed. For example, if the statement closes on the10th monthly, make payments as soon after this date as possible. This reduces the daily interest charged on the amounts that are outstanding in the account.

Though it seems like the credit card debt will never end, the cardholder with a credit card debt must exercise patience and never miss a payment.