From midnight tonight, new rules mean that for most debit and cedit card transactions, consumers will need to know their pin number. Sarah Foster looks at what the change involves and its likely impact.

IN Northampton in the summer of 2003, a trial took place that was to shape the future of how we spend. In response to the growing problem of fraud, new cards were introduced relying on microchip technology to process payments. Instead of signing for their purchase, people were asked to enter their pin, or personal identification number.

The results were positive, with more than eighty per cent of those taking part in the trial saying they liked the new system. Since then, it has been slowly rolled out across the country.

While most consumers are now using updated cards, the use of pins has been sporadic, with many stores still allowing signatures. From midnight tonight, however, this will largely cease to be the case. We look at what this will mean for shoppers and retailers.

What are chip and pin cards?

These are debit and credit cards containing a microchip which is used to store data. The embedded chip is more secure than the old magnetic strips on cards. A four-digit pin is used to verify a purchase.

Does everyone have one?

No. While over the past two years, issuers have been working to replace all credit and debit cards in the UK, they have not yet done this. A recent survey found that nine per cent of people had no chip and pin card, although the Association of Payment Clearing Services (Apacs), which is overseeing the process, says 127 million out of 141 million cards in the UK are now chip and pin.

Why have chip and pin cards been introduced?

It is hoped the system will reduce fraud. Without it, it is estimated that this would cost Britain £1bn by 2008. The chip means a card cannot be 'skimmed', where the data from its magnetic strip is electronically copied onto another card. This fraud is often carried out in restaurants, shops and petrol stations.

Another benefit reported by larger companies of using pins is that time is saved by staff not having to find pens and check signatures.

What will happen after midnight tonight?

Essentially, where fraud does occur, the retailer - and not the card issuer, as is currently the case - will be liable. This will act as a disincentive to stores accepting signatures, which are more likely to be fraudulent than pin numbers. They will have the right to refuse payment from chip and pin cards if the cardholder does not know their pin.

What if I haven't yet received my chip and pin card?

People who have not been given a new card can continue to sign receipts as before.

What if I don't know my pin?

Contact your card provider and they will send you a reminder. You can change your pin to something more memorable at any bank or building society's cash machine.

Will I always need my pin?

No. Nine out of ten stores have converted to chip and pin, but many still haven't. Those which won't insist on pins include B&Q, Clinton Cards and Waitrose. It is thought that for smaller retailers, the cost of converting may be prohibitive. These stores will continue to accept signatures.

What if I can't use chip and pin?

Elderly people and those with disabilities can apply for a chip and signature card, with which they can continue to sign for purchases. Apacs says more than 100,000 of these have been issued.

Does everyone welcome the change?

No. Groups like Age Concern and consumer bodies have raised concerns that the new system will result in chaos. While accepting the need to combat fraud, a spokesman from the National Consumer Council says today's move has been mismanaged.

"Our concern is that people with either memory difficulties or physical disabilities are going to be severely inconvenienced and caused a lot of frustration because the vast majority haven't been informed by their card issuer that they need to request the alternative card," he says.

"They are going to turn up at the shops with their chip and pin and they are not going to be able to make a purchase. We have already started to hear anecdotally that a lot of people are having to leave their shopping behind. "Embarrassing situations have arisen where shop staff haven't heard about this alternative card and have been looking at people with suspicion because a lot of shops haven't trained their staff properly. We estimate that up to three million people are going to experience severe difficulties.

"Until it actually happens, I don't think we are going to realise how successful or disastrous it will be. We will see the full fall-out tomorrow."