Credit Card Chips — What You Need To Know

About 1.2 billion credit and debit cards have been upgraded to chip cards. These cards are an effort to reduce credit card fraud. The process for using them is a little different for both the credit card holder and the business processing the card. Here’s what you need to know.

The official name of the new cards is EMV, which stands for Europay, Mastercard, and Visa. These are the companies who developed the technology. By the end of this year, over 600 million of them will have been issued. The chips are an effort to reduce credit card fraud and make it more difficult for someone to access your personal information. According to ABC News, when you make a purchase with the chip card, a unique code is created for that purchase. So even if someone did steal information about that specific transaction, the information is unique to that transaction. If it’s duplicated, the fraudulent charge will be denied.

It isn’t a requirement, and consumers can still make purchases by swiping their cards like they have been doing for years. But any retailer or small business who has not upgraded their credit card networks to accommodate the new cards is liable for any fraudulent activity on any Visa, Mastercard, or Discover card purchase made with a chip card. Gas stations have until 2017 to make the change.

The number of people who had credit card information stolen in 2014 was 31.8 million, which is three times as many as in 2013. The traditional credit card, the one with the magnetic stripe you swipe for a purchase, contains information that never changes. So if a thief gets your information from just one purchase, it’s easy for them to use it to make multiple fraudulent purchases. The unique code created with each transaction made with the new cards avoids this security gap.

Since there is no physical interaction between your chip card and a terminal, your online purchases are at as much risk as they have ever been. So make sure you do your online shopping with reputable companies.

With the traditional credit cards with the magnetic strips, you swipe your card at the point of purchase, sign for it, and you’re done. The process with an EMV takes a bit longer. Because the card reader needs to communicate with the financial institution and create a unique transaction code, it takes a bit longer to make a purchase. In a process called dipping, you slip your card into a slot in the reader and wait while it talks to your financial institution.

It still takes just a minute or so but isn’t quite as fast as making a purchase with a magnetic stripe card. In other parts of the world, the chip cards can be tapped against a reader, speeding up the process, but this technology isn’t yet available in the U.S.

Creditcards.com states that you may hear the new cards referred to with any of the following terms.

  • smart card
  • chip card
  • smart-chip card
  • chip-enabled smart card
  • chip-and-choice card
  • EMV smart card
  • EMV card

By the end of this year, 25 percent of all debit cards and 60 percent of all credit cards will have been converted to EMV. Only 40 percent of U.S. retailers will make the required technology updates by the end of the year. If you received a chip card and want to make a purchase at a retailer who has not yet made the update, you can still use your magnetic stripe to make your purchase.

Sources:

What You Should Know About The New Credit Card Chip Rule

8 FAQs about EMV credit cards

[Photos courtesy of Matt Cardy, Joe Raedle, Tim Boyle/Getty Images]