EMV Chip Cards and Liability

A chip card at a terminal that does not read the chip can turn a fraud claim into your loss. This guide explains the two Visa dispute conditions behind that, using Visa’s Dispute Management Guidelines for Visa Merchants (June 2024) and the PCI Council’s Guide to Safe Payments, both read on 2026-10-16. Rules apply differently across card networks, and your processor’s setup matters. This is general information, not legal advice.

Condition 10.1: counterfeit fraud on a chip card

Visa describes this as a cardholder claiming they did not authorize or participate in a transaction on a counterfeit card. The cardholder’s bank must have determined that all of these occurred: the transaction was completed in a card-present environment with a card reported as counterfeit, the transaction qualifies for the EMV liability shift, the card is a chip card, and either the transaction did not take place at a chip-reading device, or it was chip-initiated and authorized online but the processor did not transmit the full chip data to Visa in the authorization request. Visa says the most common cause is that the cardholder has a chip card but the transaction did not happen at a chip terminal or was not chip read.

Condition 10.2: lost, stolen or not-received cards

Visa describes this as a claim about a lost or stolen card, or a card not received as issued. The bank must have determined that the transaction was card-present, qualifies for the EMV liability shift, the card is a PIN-preferring chip card, and one of these happened: no chip-reading device was used, a chip-initiated transaction occurred at a reader that was not EMV PIN-compliant, or the chip transaction was authorized online without an online PIN and the processor did not send the full chip data. The most common cause, Visa says, is a PIN-preferring chip card used at a non-EMV terminal or a chip transaction initiated without full chip data.

How to respond

For 10.1, Visa says that if the transaction took place at a chip terminal, provide documentation that it was chip read and that the full chip data was transmitted; if it did not take place at a chip terminal, accept the dispute. For 10.2, provide documentation that the transaction took place at an EMV PIN-compliant terminal, or accept if it did not. For both, if a credit or reversal was already processed, send documentation of the amount and date, and if the cardholder no longer disputes, send their letter or email. See how to respond to a chargeback.

How to avoid them

Visa’s advice for both conditions: make sure your terminal is EMV-compliant (or EMV PIN-compliant for 10.2) and that the correct cardholder verification method, such as signature or PIN, was obtained; process chip cards properly; and train your staff on handling terminal issues.

The PCI Council’s Guide to Safe Payments adds that payment terminals should be on the List of PCI Approved PTS Devices and support EMV chip, and that a merchant moving to EMV chip terminals has a chance to choose one that also provides encryption and tokenization. For more on terminal security see PCI compliance for small business; for choosing hardware and provider terms, see how to choose a POS system and contactless payments and Tap to Pay.

What we did not verify

We did not verify the other card networks’ chip liability rules, how any specific terminal or phone app is certified, or whether a particular processor transmits full chip data. Ask your processor for confirmation in writing for your setup.