American Express Co. said it would limit the costs of fraudulent credit-card transactions for U.S. retailers as they upgrade their systems to begin accepting chip cards.

The move comes less than a week after Visa Inc. and MasterCard Inc. said they would speed up the certification process of chip-reading check-out terminals and limit costs to merchants during the transition away from old cards with magnetic stripes.

It also follows widespread complaints from merchants across the country. As of last October, retailers that didn't make the transition to chip cards have been on the hook for counterfeit transactions that previously were covered by card-issuing banks. The costs of the fraud, known in the industry as chargebacks, have been starting to stack up.

Under its new policy, American Express said retailers wouldn't be held responsible by the end of August for bad charges on card transactions of less than $25. By year's end, the company plans to hold merchants liable for a total of 10 bad charges per card account, with costs for the remaining bad charges moving to the card issuer."

"We recognize the migration to EMV in the U.S. is an effort that will take time, which is why we are making these policy changes in order to provide flexibility to those merchants that may need more time to upgrade their point-of-sale terminals to accept EMV chip cards," said Mike Matan, vice president of AmEx's global network business.

American Express, which said 40% of its costs related to credit-card fraud in the U.S. involve purchases of less than $25, said the policy will stay in effect until April 2018.

Meanwhile, under the prior policy implemented in October, the party with the least secure form of technology—either the retailer or the card issuer—was responsible for the costs of card fraud.

Write to Tess Stynes at tess.stynes@wsj.com

 

(END) Dow Jones Newswires

June 22, 2016 10:35 ET (14:35 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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