Goldhawk Fights Back: Chip Card Liability

This is a weekly column by Dale Goldhawk, Canada’s best-known consumer advocate. A journalist, author and broadcaster, Dale hosts Goldhawk Fights Back For You, on AM 740 or at AM740 ZoomerRadio, Monday through Friday from 11 am to 1 pm, in the eastern time zone. Visit his website at

Soon, all our credit cards and bank debit cards will be Chip cards. No more magnetic stripes. No more signatures required on bills.

Does it follow that both consumers and banks will enjoy increased protection against fraud and identity theft? Not necessarily.

Back in the fast-disappearing old days, banks covered credit card fraud with a “zero liability” policy. However, during that same time, they did not cover debit cards with blanket “zero liability” protection because there was an escape clause. If it could be shown that you somehow chose or used your Personal Identification Number (your PIN) carelessly, then you could be liable for the fraudulent loss.

With the new cards, it’s all Chip, all the time and all PINs. NO more signatures. So your qualified “zero liability” replaces your total liability on credit cards.

Here is part of a CIBC Visa credit card agreement for a Chip card:

“If a cardholder fails to comply with any obligation in the section entitled personal identification number (PIN) and someone other than the cardholder makes any PIN-based transactions on the Visa account, the cardholder will be liable for those transactions and any interest, fees and losses incurred….”

In the debit card agreement for the same caredholder, you will find this additional cautionary tale: “Contributing to unauthorized use: if someone uses your bank card or PIN without your authority but your actions (or inaction) contributed to that unauthorized use, you are responsible for all losses….”

Here is an excerpt from a Royal Bank Visa credit line agreement for small business:

“We (the business cardholder) will not be responsible for debt charged to our account as a result of the fraudulent and unauthorized use of a card, cheque or account number, provided that we can establish to you (the bank) that we have taken reasonable steps to protect cards and cheques against loss or theft and to safeguard our PIN and other security codes in the manner set out in this agreement or as you (the bank) may otherwise advise us from time to time.”

The bottom line: We are probably all safer with Chip cards until the bad guys figure out how to match that technology. The banks will win by paying out on fewer losses. But us mere mortals face the risk of only qualified “zero liability.”

Photo © Igor Zhorov


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Dale GoldhawkGemini award nominee, journalist and broadcaster, Dale Goldhawk has earned Canada’s trust by his four decades of work exposing fraud and greed in the marketplace. To read more of his articles, go to (now part of the ZoomerMedia family of websites).