You may have heard about EMV (Europay, MasterCard, and Visa), or chip-enabled credit cards. Some of you may even have one of these cards. They resemble traditional debit or credit cards, except they have a distinguishing feature – a computer chip embedded into them, which is usually located on the front of the card, near the name of the issuer.
Although these cards seem like a relatively new item in the U.S., many other parts of the world have already made the move towards chip-enabled cards, says Matt Schulz, senior industry analyst at CreditCards.com. “Much of the rest of the world is already there. It’s us here in the United States that are kind of dragging our feet a little bit,” he says.
Why haven’t all U.S. banks and financial institutions made the switch? Schulz explains there are likely a number of reasons that may explain our lag behind other parts of the world like Europe, but he explains one particular theory to us. “Part of the reason is that we hadn’t really started working on it. Then, 2008 and 2009 happened, [during the] great recession, the last thing a merchant that is struggling to keep their business going wants to do is spend a ton of money to update their terminals to take a new type of credit card…I think that certainly had an impact.”
In spite of our slow and steady approach, these cards have made their debut and seem to be gaining popularity. If your financial institution offers chip-enabled cards, and you’re thinking about making the switch, there are a few things you should know first.
1. Increased Security
Traditional cards use magnetic stripe technology. Composed of iron-based particles, the stripe contains three tracks. Each track contains data like your bank information, your account number, and your location. Basically, when you swipe your card, the terminal communicates with the bank to okay your purchase. Once the bank approves it (which occurs relatively instantly), your purchases is complete and the bank records the transaction onto your bank statement.
“There’s a couple of big pluses for the chip. One of them is that it’s a complex enough technology where it makes a credit card harder to counterfeit. Like, the actual physical card [itself],” says Schulz. Because a magnetic stripe’s static information can be copied, mag stripe cards can be duplicated by criminals. Chip-technology helps to prevent the physical copying of these cards.
“When you use the card in a chip reader, the chip creates a unique code that is associated with that transaction that is then provided to the merchant. So, if you buy something at Target, as part of the process of the purchase, a code will be transmitted that basically says okay this purchase is legitimate, accept this card..essentially,” he explains. “If there’s a data breach or something along those lines and someone finds that data, they won’t be able to use that code for any future use of that card… I’ve heard it described as the equivalent of finding an expired password associated with the card,” he adds. Dynamic authentication, coupled with a chip that’s tough to copy, makes for a more secure card all around.
Schulz also explains to us how one of the controversial elements of chip-enabled technologies is that while some people think it will reduce credit card fraud that’s associated with the actual physical card, others feel it will only push scammers and criminals more towards online credit card fraud.