Over the past decade, credit card issuers around the world have switched from magnetic stripe credit cards to EMV® chip credit cards. The main reason for the change is security; a chip credit card is less prone to in-person fraud than magnetic stripe cards.
Here’s a look at how smart cards make your point-of-sale transactions more secure, as well as why you should always take precautions to protect your personal information.
Magnetic stripe vs chip credit cards
The main problem with magnetic strips on credit cards is that they contain all of the cardholder information that would be needed to make a purchase – or to make a counterfeit card. And with today’s technology, that data can be stolen with simple phone apps or dime strip readers.
So how does your credit card chip work to thwart potential card thieves? Without getting too technical, here’s the basic difference: While the data on a card’s magnetic stripe stays the same over time, your card’s chip generates a unique code for each transaction that can only be used once. one time.
In other words, every time you insert your chip credit card into a reader – or use its contactless payment feature – the chip’s computer generates a new transaction code for that purchase. This means that even if a thief were to successfully copy your credit card chip information for a specific point of sale (POS) transaction, they would be unable to do anything with it.
The same point is true for data breaches at retailers. Your credit card chip won’t stop a data thief from stealing transaction data or records for in-person purchases, but it does make the data itself much less valuable and more difficult to use.
Does your chip credit card need a signature or PIN?
For decades, cardholders who used magnetic stripe credit cards had to sign for every purchase. This signature was then compared by the company with the signature on the back of your credit card. However, after the transition to chip credit cards, signatures became less common.
Nowadays, it has become quite rare to be asked to sign a receipt if you make a purchase with a chip credit card, although it does happen (mainly in restaurants). Most of the time, you insert your smart card into the reader, wait a few seconds, then remove your card when prompted (often with an abrasive alert designed to make sure you don’t leave without your card).
However, the chip-and-signature approach is only used in the United States. If you’re traveling internationally, your signature-based card may raise eyebrows – or it might not work at all.
This is because many other countries, especially in Europe, operate on a chip and PIN code system that uses both an EMV® credit card chip and a four digit PIN code for large purchases. For small purchases, contactless payments are common and do not require a PIN code.
Smart cards don’t solve everything
To be completely clear, EMV® card technology does not protect you from fraud. For starters, someone who steals your physical card can still use it to make purchases anywhere without verifying signatures or IDs (which, let’s face it, is most places these days. ).
Plus, your credit card chip does nothing to solve the problem of digital card fraud. It is still relatively easy for a thief to use your stolen credit card information online. So while chip credit cards have helped reduce in-person card fraud, online credit card fraud has steadily increased.
Chip card technology also does not prevent various credit card scams, such as thieves who trick cardholders into revealing account information such as their card number or password. It also does not prevent the opening of accounts in the name of consumers without their knowledge.
A step in the right direction
Right now, most, if not all, of your credit cards are likely to use chip technology, and the majority of retailers will have a chip card reader. But while a chip credit card can certainly make your credit information more secure, it is not 100% secure.
Even if you have a chip credit card, it is still extremely important to protect your personal information and monitor your credit reports for any suspicious activity in order to avoid credit card fraud.
If you are the victim of credit card fraud, be sure to report it immediately to your issuer. On the bright side, unauthorized credit card purchases won’t bankrupt you; By law, you’re only responsible for a maximum of $ 50 in fraudulent credit card purchases, and most issuers won’t charge you a dime.