Gas Station Chargebacks

Table of Contents

  1. Why Are Card Skimmers Such a Big Problem?
  2. What Exactly Is Changing With the Liability Shift?
  3. Potential Issues with Upgrading Card Readers
  4. Conclusion
  5. Frequently Asked Questions

Merchants who deal in the necessities of modern life and other traditional commodities may feel less vulnerable to chargebacks than retailers operating in the wild west of eCommerce. Certainly, there are risks that are reduced when you’re selling straightforward products at physical storefronts. However, merchants should always seek to understand the specific chargeback scenarios that affect their type of business. In April, the chargeback liability for non-EMV transactions at gas stations shifted, putting those merchants at increased risk for chargebacks. Fuel merchants who haven't yet upgraded their card readers should be prepared for a dramatic increase in chargebacks. Fortunately, there are ways merchants can fight back.

New call-to-actionEMV-enabled card readers are ubiquitous at brick-and-mortar retail establishments these days, and for good reason. The EMV chip helps to prevent the authorization of transactions made with stolen or cloned credit cards, protecting consumers and reducing fraud in card-present environments. Many gas station pumps, however, still use card readers that work by reading the magnetic stripe on the back of the payment card.

The risk of using non-EMV card readers at gas pumps is compounded by the existence of card skimmers. These are small electronic devices that criminals insert into the card reader itself. When a customer swipes their card at the gas pump, the skimmer reads the card information off of the magnetic stripe and stores it for later retrieval. When the fraudster comes back later to pick up the skimmer, they can use the stored payment card data to create “cloned” credit cards or to place card-not-present transactions over the phone or internet.

Many perpetrators also use card skimmers to gather a large amount of credit card numbers which they then sell on the dark web. This makes it more difficult to trace the stolen numbers back to the source. A customer complaining about a fraudulent transaction may lead to the person who made the purchase getting caught, but it's often nearly impossible to trace that stolen number back to the person who installed the card skimmer. Therefore, card numbers will continue to be stolen and sold to other fraudsters.

Why Are Card Skimmers Such a Big Problem?

Skimmers are relatively easy to make and conceal in gas pump card readers, and they can be hard to trace. All this makes them an attractive scheme for fraudsters. Consequently, skimmers are aggravatingly common. Anecdotally, you need only follow your local news for a few weeks and you’re likely to see a news story or two about a card skimmer being discovered at a gas station in your area. The U.S. Secret Service created a task force to investigate credit card skimmers about two years ago, and they reportedly recover between 20 and 30 skimmers per week, with each one containing data from 80 credit cards on average.

In light of these statistics, the reasoning behind the liability shift for fraudulent transactions is quite understandable.

By strongly incentivizing merchants to install EMV chip readers, the banks and card networks hope to render card skimmers obsolete.

EMV chips can’t be copied and cloned the way magnetic stripe data can, which makes them an effective technological solution to a growing and costly problem. Unlike magnetic strips, which store the credit card number in simple data, EMV chips can't be simply scanned to reveal a cardholder's information. Instead, they transmit tokenized data that's unique to each transaction, which means that intercepting the reading of an EMV chip doesn't provide any value to a fraudster.

In addition, even if someone did discover a way to use intercepted EMV data, the difference between the insert system of an EMV chip and the swipe system by which magnetic strips are read makes it physically difficult to intercept that data without interrupting the original transaction and revealing to the customer that something is wrong.

What Exactly Is Changing with the Liability Shift?

As things currently stand, fuel merchants are liable for fraudulent transactions made with lost or stolen cards, but liability for counterfeit cards—the ones fraudsters are able to create with card skimmer data—rests with the cardholder’s issuing bank.

The liability shift (originally slated for October 2020) will take effect on April 17, 2021. This will impact fuel merchants in two key ways:

  • Merchants will not be held liable for any type of fraud if the transaction involves an EMV-chipped card and an EMV reader
  • Merchants will be liable for counterfeit fraud if the transaction did not utilize EMV technology

In other words, the use of EMV chip readers will grant merchants additional protection from lost or stolen card fraud, but without EMV readers, merchants will be on the hook for counterfeit card fraud when they previously weren’t.

Potential Issues with Upgrading Card Readers

There are various reasons why merchants might drag their feet when it comes to upgrading gas pump card readers despite the ever-present threat of card skimmers. One reason is cost. Another reason is that EMV chip readers can take a little more time to process transactions than older magnetic stripe readers. Some customers don’t like this small inconvenience and may complain or choose to patronize a different gas station.

Any merchant on the fence about the Learn How To Fight Them The Smart Waycost to benefit ratio of upgrading should look at the numbers. We have good data showing that the use of EMV chip readers significantly reduces fraud.

According to VisaNet, the 84% of service stations that now use EMV chip readers at the cash register have seen counterfeit fraud decline by 46% from year to year.

Conversely, when only 6% of gas pumps were EMV enabled, counterfeit fraud at the pump increased by 36% from year to year.

While some customers may be resistant to waiting for EMV readers and entering their PIN at the pump, these figures paint a stark picture of how fraudsters adapt to changing circumstances and seek out the point of least resistance for their crimes. Defeating the security of EMV chips is way too much work for the average fraudster, so they will look for magnetic stripe readers. While these are still plentiful, the October liability shift will prompt many fuel merchants to upgrade their readers at last, and any holdouts will soon find themselves repeatedly targeted by fraudsters looking to get some profit out of their skimmers while they still can.


Card skimmers are by far the biggest fraud problem and the most significant source of chargebacks for gas station operators. There are some other scenarios that impact fuel merchants in particular—faulty pumps that dispense regular instead of premium gas may be subject to chargebacks related to the product sold being deficient in quality or “not as described,” and pump terminals that cannot print receipts may lead to customers opportunistically filing chargebacks on the basis that no receipt information was provided.

These sorts of chargebacks can be prevented by making sure terminals are working correctly and loaded with receipt paper, and of course customer should always be provided with the type and quality of gasoline they select at the pump. As is so often the case, getting fraud under control is the real challenge.

Simply put, fuel merchants must upgrade their gas pumps to include EMV chip readers or they will be exposing themselves to revenue loss from fraudsters who will be seeking out vulnerable magnetic stripe readers for as long as they can still find them.

Don’t let thieves siphon money out of your bank account until you’re running on empty. By taking the steps necessary to avoid ending up on the wrong end of the coming liability shift, you can shut down a major source of fraud and give yourself more time and resources to focus on improving your business.


What year did the EMV liability shift occur?

For most retailers, the EMV liability shift occurred in 2015. For gas stations, the shift was repeatedly delayed until it eventually took place on April 17, 2021.


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