Your Guide to Understanding Chip Credit Cards

emv chip credit card

By now, your bank has probably replaced your old credit card with a new chip card. Your new card, with the small, metallic square on the front, is a huge step forward in the fight against credit fraud and represents a massive shift in the way Americans do business.

Knowing this, you may have some questions about what they are and if they’re really that big of a deal. With that in mind, here are the answers to a few frequently asked questions about chip cards.

Are They Really Better?

Yes, they are better. They’re better because they’re more secure than traditional credit cards.

A traditional card has a black magnetic stripe across the back that is swiped through a card reader. The data stored on that black stripe never changes, making it relatively easy to steal. If a hacker obtains the information on the magnetic stripe, he can then duplicate it as many times as he wants.

In direct contrast to a traditional credit card, the data stored on a chip card constantly changes. The small metallic square on the front is actually a computer chip that creates a new transaction code every time a purchase is made. The code can only be used once, so even if a hacker obtains it, he can’t use it to make additional transactions.

If Chip Cards Are So Much Better, Will They Do Away with Fraud?

Chip cards won’t do away with fraud altogether, but they should greatly decrease it. Over the past decade, hackers have targeted countries such as the United States where chip cards weren’t in use. Now that the United States has started to implement this new technology, hackers will find it increasingly difficult to steal credit information and may focus their attention elsewhere.

It’s important to note that chip cards only improve fraud protection when they are used to make in-store purchases. While they are a huge step in the right direction, they won’t make online shopping more secure.

How Do They Affect Purchasing?

The only obvious change for consumers is how the card is physically used to make a purchase. Instead of being swiped, it’s inserted into a slot. While it’s inside the slot, data runs between the chip and the financial institution that issued the card. It takes a few seconds longer than swiping, but as the technology improves and more merchants come on board, the processing time should decrease.

What About Online Shopping?

You can use your chip card online and over the phone like you always have.

What Is the Chip Card’s Official Name?

It’s actually called an EMV card. EMV stands for Europay, MasterCard and VISA. EMV cards have been used for years in other countries but have only recently made their way to the United States.

What Took So Long for The United States to Make the Change to EMV?

Cost. It costs billions of dollars to replace magnetic stripe cards with chip cards, and that doesn’t take into account the millions of card readers that merchants must replace in order to accept the new chip cards. However, when the expense of credit card fraud is taken into consideration, the upfront costs should be quickly offset.

What About Debit Cards?

Debit cards will eventually become chip cards, and some issuers have already made the switch. However, since banks have to update their software to handle the new chip debit cards, their rollout is progressing more slowly than chip credit cards.

What about PINS?

Like most traditional credit cards, most chip cards require a signature instead of a PIN, making them almost identical to traditional cards at the time of purchase.

Why Do New Chips Cards Still Have the Magnetic Stripes?

The transition to chip cards isn’t complete. Many merchants are still unable to process chip cards because they haven’t updated their systems. Therefore, issuers are keeping the stripes on chip cards so that those merchants can continue accepting credit cards.

However, once the rollout is complete, the magnetic stripe will probably not appear on new cards.

Chip card technology signifies a huge, positive shift in the way Americans use their credit cards. By reducing credit fraud, it will save billions of dollars every year while safeguarding consumers.