WalletHub, Financial Company
Chip cards are safer and more secure than traditional credit cards that only have magnetic stripes because they are difficult to clone, due to their sophisticated encryption technology. This technology is a major security upgrade from magnetic stripes.
The term “chip card” refers to a credit card that has a computer chip embedded inside it. The chip is the small, metallic square on the front of any recently-issued credit or debit card. When you dip a chip card in a reader (as opposed to swiping a magnetic stripe card), it creates a unique transaction code.
Here’s Why Chip Cards Are Safer
- Difficult to clone: When you insert a chip card into a terminal, it creates a unique code for that transaction. When you swipe a magnetic stripe, the same information is relayed every time, making it easier for someone to copy and misuse.
- Sophisticated encryption: Chip cards have encryption technology built right into the microchip. When a transaction happens, the chip creates a unique transaction code that cannot be used again and sends it to the issuer for verification.
- Chip-and-signature vs. chip-and-PIN: Most chip cards distributed in the U.S. are chip-and-signature cards. They’re not as safe as chip-and-PIN cards because it’s easier to forge someone’s signature than to guess their PIN. Both are still safer than magnetic stripe cards.
Chip cards are also known as smart cards, or EMV cards. EMV stands for Europay, Mastercard and Visa – the companies that developed the new standard for card security and verification. Chip cards play a big role in that, making payments safer for all of us.
It’s important to note, though, that chip cards do still have magnetic stripes because not all merchants have card readers capable of accepting chip cards. If a store does not have a point-of-sale device that’s chip-enabled, meaning there’s no slot for you to dip your credit card, then your transaction will be processed using the magnetic stripe on the back of the card. As a result, chip cards are not as safe as they could be. The magnetic stripe could still be copied, allowing fraudsters to make purchases where a chip is not required.
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