[heywire]

The machines (and/or PoS software) are smart enough to know if the card that was swiped contains a chip (it is in the track data on the magnetic stripe). But if the card reader lacks the chip reader, it obviously won't reject the swipe. The incentive to upgrade is that now the retailers will be on the hook for any fraud when a customer has to swipe their chip-enabled card due to lack of support at the store.