Chip and PIN credit cards and chip and signature credit cards both rely on EMV verification technology and are generally regarded as being more secure than the standard magnetic stripe credit cards that have been used for decades in the United States. Chip and PIN credit cards rely on an embedded computer chip that corresponds to a PIN number assigned to each cardholder. For a payment to be authorized at a merchant that has a chip reader, the user must insert their card into the payment terminal and input their PIN. Chip and signature cards work a bit differently, as payment verification is completed with a signature, much like with a magnetic stripe credit card. In fact, both chip and PIN and chip and signature credit cards still have magnetic stripes in order to promote usability in areas that have not yet become fully EMV compliant – such as the United States.
The biggest difference between chip and PIN and chip and signature credit cards
involves so-called “offline transactions.” Such transactions occur primarily outside the United States with kiosks (think ticket machines in train stations or parking garages) or at merchants that operate in rural areas where telecommunications costs are high. Chip and PIN cards work for these transactions because a consumer’s PIN can be cross-referenced against data stored on the computer chip embedded within the card and therefore verified. Chip and signature cards do not work because the offline payment terminal is unable to communicate with the issuing institution and thereby verify the card as being legitimate.