If you have a debit or credit card, you’ve likely noticed that you’ve recently received a new version of the card that includes a chip. As such, you’re probably wondering what this chip is and why your cards need it. To help you ease into chip technology, we’ve broken down everything you need to know.
What are chip cards?
Although this technology is not new — Europe has been using it for nearly two decades — the U.S. is finally making the switch from magnetic stripe to chip cards (also called EMV or smart cards). Why switch now after all of these years, you ask? Simply put, security. When you pay for a purchase with your magnetic stripe card, the full card number (as it appears on the card) is sent to complete the payment without encryption — meaning any machine that can read a magnetic stripe can pick it up.
On the other hand, when you pay with a chip card, that transaction is not only strongly encrypted, but also assigned a one-time code that is no longer valid after the payment is received (unless you need to make a return). Because of this, chip card numbers are a lot harder to steal using point-of-sale (POS) skimmers or any other tactic, as the information on the chip is constantly changing. Since this is the case, it also means that if your payment information is leaked in a data breach, the hacker is less likely to use your information for fraudulent transactions because the information they’ll have is no longer valid. It should be noted that while these chip cards can help reduce card fraud, they cannot completely eliminate it.