The chip in a credit card is a microprocessor, or tiny computer, that makes a credit card transaction more secure. These chips - also called EMV chips - are only about a centimeter wide, but they are powerful processors that generate a unique code that represents a single transaction each time you “dip” your card into a payment terminal. Once used, the code - also called a “token” - cannot be used for a future transaction. So if a fraudster attempted to intercept your chip transaction, they wouldn’t get anything of value.
Physically, EMV chips are made of very thin layers of glass with small circuits embedded between them. The layers are then bonded with a gold or silver contact pad, which also serves as a protective layer. So the chip itself is actually hidden behind the gold or silver layer you see on the front of the card. The chips aren’t much different from card to card, and all are capable of generating the unique (or “dynamic”) transaction codes.
Credit card chip technology has been used in Europe and other countries since 1994. But the EMV card transition in the U.S. only happened in 2015, along with the fraud liability shift from credit card companies to merchants who continued to allow magnetic stripe transactions. All credit cards in the U.S. still have magnetic stripes as a backup measure, but paying with your chip is safer overall, so it’s best to pay with your chip when given the option.
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