3 Things Everyone Should Know About Chip-Enabled Credit Cards
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.
2. Not all chip cards are created equal
“The main thing to know, first of all, is there aren’t a ton of chip-and-pin enabled cards out there. You might see on a website where it talks about chip technology. [But], you have to pay attention to whether they talk about your card including a pin with it…If there’s no pin, you have what’s called a chip-and-signature card, which has a chip, looks basically the same as a chip-and-pin card would, but instead of putting in your pin, you sign for it the same way you would with a mag stripe card,” he explains.
Although chip-and-signature cards may provide you with increased security over a mag stripe card in many ways, they do not provide the same benefits as chip-and-pin cards do. Chip-and-pin cards are thought to be more secure by virtue of the fact that your identity is verified by a pin, as opposed to a signature. Additionally, chip-and-pin cards are the most universal.
For now, because many U.S. merchants have not changed their technologies to accept chip-enabled cards, the chip cards we are receiving are rather unique. “As part of the whole transitional period, most cards will still come with the magnetic stripe on the back, so you’ll end up getting this kind of hybrid that you’ll be able to use in the short term while everybody upgrades their terminals and then also in the longer term, once those terminals are in place,” says Schulz.
A few chip-and-pin cards that are available now
- Barclaycard Arrival Plus World Elite MasterCard
- USAA World MasterCard
- Wings Financial Credit Union
- Andrews Federal Credit Union
- United Nations Federal Credit Union
3. Traveling abroad?
“The pin is really the key thing that you’re looking for…[Chip-and-pin] is the type of card that will be the most universally accepted. If you have a card with a magnetic stripe, like the typical one’s we have here in the states, or a chip-embedded card that you sign for instead of using a pin for, you’ll probably be able to use those cards in the big touristy spots [for instance, at the Eiffel tower] but if you get kind of off of the beat and path, you’re a little more likely to run into merchants that might only accept a chip-and-pin card,” he explains.
Schulz also explains how at some places abroad, you may not be able to use your chip-and-signature card at all. For example, if you stuck with no cash at an unmanned kiosk, you may run into trouble if the only thing in you’re pocket is a chip-and-signature card. Or, say for instance, you’re trying to get a train ticket. You may run into serious problems if you can’t go up to the counter and speak with a worker. Trying to fill up with gas late at night? Hopefully you have another form of payment because you may not be able to use your chip-and-signature card. Generally, if you’re in a smaller town, you may run into some acceptance issues as well. Having a chip-and-pin card will reduce or even eliminate many of these concerns.