If you’ve recently gotten a new credit card or have gotten an updated replacement for an old credit card, you might have noticed there is now a small chip on the face. This is the latest security technology in the U.S. to combat the growing concern of credit card fraud from counterfeiting, lost or stolen cards, and data security breaches. The credit card chip is basically a microchip, meant to be read by chip-enabled terminals that will (hopefully sooner than later) be more available at U.S. retailers. At these terminals, instead of swiping your plastic and using the old magnetic strip found on the back, you will instead insert your card so the chip can be read.
So what does this all mean? Why chip technology? Why are these cards safer? Are they actually safer?
Here’s a list of everything you might want to know about your new chipped credit cards.
1. What is a chip card?
A chip card is still a regular credit card just with upgraded security features. These newer cards are sometimes also called “smart cards” or IC cards because the data on the credit card is stored on integrated circuits rather than the magnetic stripes. But, in the U.S., new credit cards will still include magnetic strips since most retailers are not quite ready to support the new chip features.
This new security standard is called EMV, which stands for Europay, MasterCard, and Visa, the three companies that originally created the standard. The standard is now managed by EMVCo, a group with equally split control among Visa, MasterCard, JCB, American Express, China UnionPay, and Discover.
2. How long has EMV been around?
The EMV standard was initially written in the early 90s with its first use in France as early as 1992.
3. Where is EMV already used?
The United States is one of the few industrialized nations in the world to not have already adopted and transitioned to this technology standard. According to statistics from EMVCo only 7.3% of the U.S. had adopted EMV cards as of Q4 2014 with only 0.26% of card-present transactions being EMV from July 2014 to June 2015. Compare that to Europe Zone 1 in the same time period, where 96.94% of card-present transactions were EMV.
4. Why is the EMV chip card better?
Because magnetic stripe data is printed onto your credit card and doesn’t change, it makes it easier for fraud to occur. A thief who has access to that data just needs to steal the sensitive information of the card and cardholder once in order to begin making unauthorized transactions. Traditional credit cards therefore were hot targets for counterfeiters who could use stolen card data over and over again to get access to cash.
EMV chipped credit cards, on the other hand, do not have static information. The credit card chip creates a new set of data that cannot be used again for each transaction that occurs. If a cybercriminal gained access to your data from a point of sale, it would be worthless as the information would have already been used.
5. How does the EMV chipped credit card work?
As mentioned before, chip cards will be inserted, or “dipped,” into upgraded terminals instead of swiped. When traditional cards slide through a reader, the terminal interprets the static card data on the magnetic stripe, verifies the data with the card issuer, and processes the transaction.
When a chip card is dipped, data flows between the card chip and the financial institution that issued your card to verify the card’s legitimacy, and then creates the unique transaction data once the card is verified. This process will take a little longer than just a swipe as there are backend processes being done to generate new secured data every time you make a purchase.
6. If I’m not upgraded to a chip card, can I still use my stripe card at an upgraded EMV retailer?
Yes! EMV cards in the U.S. will still feature magnetic stripes and will likely continue to include them for some time until retailers catch up. All new EMV transaction systems in the U.S. will still feature swipe functionality.
7. Can I still use my chip card at a retailer that doesn’t support EMV technology yet?
Yes! Chip cards will still include magnetic strips for swipe only terminals. If you try to insert a chip card into a terminal that’s newer but is not yet activated, an error will occur and prompt you to swipe the card instead.
But, if a retailer is already upgraded to an EMV system, you will be forced to dip your card if it does have a chip. Upgraded systems will recognize your card has a chip if it’s swiped and will reject the card until you insert it.
8. If we still have magnetic stripes, are the EMV cards actually safer?
Overall yes, but if you are still using magnetic stripe at any check-out line you are still vulnerable to traditional means of credit theft. Until the U.S. completely shifts to a chip card transaction system, we’re only partially reducing the possibility of our data being stolen because we’re still using the outdated method to transact.
While a slow transition may be necessary to help retailers prepare for infrastructure and technical changes, card users are still vulnerable. Still, each retailer that shifts over is one less place your data could be stolen. Major retailers such as Wal-Mart and Target have already changed most of their sales terminals to accept EMV.
9. Are EMV chip cards the same as RFID chip cards?
No. RFID chip cards are a completely different technology primarily focused on creating contactless transactions. RFID cards do not need to be swiped or inserted into a terminal, simply passed over the terminal, thereby allowing you to make transactions faster.
While both RFID cards and EMV cards are both considered “smart cards,” they work very differently. RFID chips draw power from a variable magnetic field created by a specialized transaction terminal and send a radio signal with your cards information to be processed. EMV cards still require physical contact and for the cardholder to input either chip-and-PIN or chip-and-signature information.
10. Chip-and-PIN vs chip-and-signature?
There are two primary types of EMV cards in wide use, chip-and-PIN and chip-and-signature. Chip-and-PIN requires both dipping the credit card into a terminal and additionally typing in a secret numerical passcode to verify the transaction, similar to how you would use a debit card. In Europe and many other locations, chip-and-PIN is more available.
America is currently implementing and utilizing chip-and-signature. Signatures are generally not verifiable until a fraud has already occurred and frankly, almost no retailer confirms the validity of a signature in real-life situations.
For the U.S. to be even safer in the future, we still need to eventually move to chip-and-PIN technology over chip-and-signature. This would add an additional secondary layer of security to our credit card information by requiring a protected password only the cardholder knows.
11. Will I be able to use my EMV card when I travel abroad?
Yes and no. Again, many other countries, especially European countries, upgraded to EMV technology years ago to combat fraud. Many foreign merchants are therefore wary of magnetic-stripe cards and unlike in the U.S., many may not have stripe terminals.
But, even if you have an EMV card, many of these countries also use chip-and-PIN terminals, NOT chip-and-signature. So, while more merchants may be willing to accept your transaction, others may still be unwilling to do so or unable to process your U.S. EMV card. Foreign retailers that are able to process your transaction may take longer, as a merchant may need to go through more steps to verify and process your card.
If you do plan to travel abroad, still get an EMV chip enabled card, with no foreign transaction fees. Airports and major train stations will most likely have ways that will allow you to withdraw cash ahead of time from a terminal using an EMV card.
12. Are EMV credit cards foolproof?
No. No amount of security is foolproof against attacks or fraud, but it does make it tougher for fraud and card counterfeiting to occur. EMV cards will reduce the amount of fake credit cards, as the new technology will be more expensive to replicate, and reduce the reward for effort for would-be-thieves.
13. If chipped cards are not foolproof, what are the issues?
Chipped cards are better and more secure. Part of the reason the U.S. saw an increase in credit card fraud was due to other countries moving to the EMV standard first. Americans became relatively much easier targets.
Overall, credit card fraud dropped significantly in European countries once the EMV standard was implemented. But, those nations began seeing an increase in the number of fraudulent activity for online transactions. The reason is because EMV cards do not protect a cardholder from online sales, where credit card information is directly provided, instead of going through a terminal.
Online fraud will likely become a growing concern, but that is simply part of the constant cat and mouse game between security experts and criminals. Customers should always be aware of safety when providing any form of personal information online. Always make sure you are transacting with a trustworthy vendor who will keep your information secure.
14. What if my information is stolen when using an EMV card?
For customers, follow the same steps as you would normally should your card become missing or stolen, or if you feel there is fraudulent activity on your card. Contact your card issuer within 24 to 48 hours and make your report. Freeze the card, review and verify your transactions, and request a new card.
As of October 1st, 2015, liability for fraud was shifted to retailers if a customer used a Visa, Discover, or MasterCard with EMV technology, but the retailer did not yet upgrade their credit card systems to support chip reading. So for business owners, it would be best to upgrade all your sales terminals sooner than later.
Banks and lenders will remain liable for any fraudulent transactions when a magnetic-stripe card is swiped at a chip-enabled terminal.
15. How do I get an EMV Credit Card?
If your card issuer has not already automatically provided you with an EMV credit card, go ahead and call their customer service number to request a new chipped card. Providers and banks should offer you a free upgrade if there’s not already one in the mail to you, even if your current card is not yet expired.
For any new credit card applications, you should be set as pretty much all credit card issuers are now only providing credit cards with EMV technology.