Chip-and-PIN cards offer increased card security and curb credit card fraud. This type of credit card is already widely used in Europe, and today more and more U.S card companies have begun making them available to their customers. As chip card technology is becoming widely adopted in the U.S., it is poised to change the nation’s credit payment systems.
Cardholders with a new chip-and-PIN card are probably curious how they work. Finding out more about your chip-based credit card or debit card will help you know when and how to use it, and how it can help make your finances more secure.
1. What Chip-and-PIN Cards Are
“They are standard bank cards that are embedded with a micro computer chip,” said Pat Simasko, an estate and financial planner at Simasko Law in Detroit. “Chip technology is becoming the global standard for credit card and debit card payments.”
2. They’re Also Called EMV Cards
Chip-based cards are also known as EMV cards because they are named after their original developers, Europay Mastercard and Visa. You may also hear them be called chip-and-pin cards or chip-and-signature cards.
3. Why They’re Called “Chip and Pin”
Payment terminals compatible with chip-based cards will frequently prompt the user to enter a PIN or a signature to validate their identity when using the card, said Simasko. That means you need to set and enter a four-digit code to authorize payments, just like you do with an ATM card.
4. What Makes Them More Secure
Magnetic strip cards use the same payment information to process and verify every transaction — think your credit card number, name and billing address. But every time an EMV card is used for payment, the card chip generates a unique transaction code that can’t be used again, said Simasko.
“Although this can’t prevent data breaches from happening altogether,” he said, “it makes it much harder for criminals to profit from what they steal.” This is because the one-use transaction code would be useless to a hacker. Magnetic strips on traditional credit and debit cards store private information that is much easier to replicate and use to commit fraud.
5. How to Pay With Chip-and-Pin Cards
When using a chip-based card to pay, you’ll need to make sure the payment terminal is compatible with this type of card. If it is, it should have a slot in the front about the width of your card. Insert your card here with the chip end in the slot and leave it there. The terminal screen will prompt you with additional steps, like accepting the payment amount and entering your PIN or signing. After the payment goes through you can remove the chip credit card or debit card.
6. Chip-and-Pin Cards Often Have a Magnetic Strip
Because they need to be compatible with other national and international standards, many chip-and-pin cards still have a magnetic strip like more conventional credit cards. “Consumers can still use their chip card when making purchases where that particular business has not moved over to that system,” Simasko said. Just swipe as you would with any magnetic-strip card.
7. You Might Still Get Asked for a Signature
Most smart-chip or EMV credit cards issued in the U.S. are “chip-and-signature” cards, meaning that customers use them like a traditional credit card and sign to authorize the payment, rather than enter a PIN, according to U.S. News.
This includes all credit cards issued by Bank of America. “Our credit cards are chip and signature,” said BofA vice president and spokesperson Betty Riess to GOBankingRates. She said this simplifies the consumer experience: “For our debit cards, customers can choose to sign or use their PIN, just as they do today. Enhanced security against counterfeiting is contained within the chip itself, not whether the customer signs or enters a PIN.”
8. Chip-and-Pin Cards Won’t Change How You’re Charged
With a chip card, the main change is to the payment information that the vendor uses to charge your account. There is no change to how the money is transferred from your account, or how transactions are declined or refunds are processed, said Simasko.
9. But They Could Affect Who’s Liable for Fraud
However, this new card technology is leading to new liability rules in cases of credit card fraud. “If someone counterfeits your credit card, generally speaking the credit card company in question is on the hook for the fraudulent transaction,” said Simasko. “With chip-and-pin, vendors will be told that if they don’t adopt the new technology then they will be on the hook for the fraud.”
10. Chip Cards Are Widely Adopted in Europe
Currently, 80 Countries are in various stages of the chip migration, reports online credit marketplace CreditCards.com. Most of Europe is using it now, including all of Ireland, said Simasko.
11. Your EMV Card Will Be Accepted in Most Countries
The U.S. is actually the last major market still using the traditional magnetic strip card system, so chip-and-PIN technology is actually a great choice if you need a travel credit card. Consumers who know they’re travelling abroad should contact their credit card companies to learn which technology is being used in that country, Simasko advised.
12. But It Might Not Be Accepted at Smaller Vendors
Whereas most European countries rely on chip-and-PIN technology, sometimes a chip-and-signature card won’t be accepted in small towns and other out-of-the-way places, according to U.S. News.
13. Picking the Right PIN Will Make Your Card More Secure
When you have a new EMV card, choosing a hard-to-guess PIN will help keep your account secure from would-be frauds should they get ahold of your physical card. Pick a PIN that has no repeating numbers, and try to avoid numerals that reflect easy-to-find information like the month and day of your birthday or anniversary.
Related: How to Pick a Theft-Proof PIN
14. Many Major Card Issuers Now Offer EMV Technology
In 2014, MasterCard and Visa announced a switch to EMV cards, which prompted a many major credit card issuers and banks to start migrating to chip technology. Major banks offering EMV cards include Wells Fargo, Chase Bank and Bank of America.
15. How to Know if Your New Card Has Chip-and-PIN Technology
A chip card will have a small, shiny rectangle on the left side when you look at it with the credit card numbers facing you — that’s the chip. If you don’t think your credit or debit card has a chip but are interested in using this technology, simply call your card company or bank and ask if it currently offers a chip-enabled card.
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