Waiter! There’s a chip in my card.
How technology is making your credit card safer.
Credit and debit cards with microchips in them – maybe you’ve noticed a small patch of silicon on your plastic – are far better at protecting your private information than cards with only magnetic stripes.
Chip cards help prevent fraud in transactions where you physically use your card, as opposed to buying something online.
“They’re virtually impossible to counterfeit,” said Danny Jones, STCU’s director of remote services, including credit cards.
To most of us, the magnetic stripes on our debit and credit card look like … stripes. To thieves, this decades-old technology is teeming with data – names, credit card numbers, and expiration dates they can pull off to make fake cards.
Unlike a magnetic stripe, the microchip generates a unique code for every transaction. That one-time code lets the merchant make the sale, but it’s useless to thieves. And, unlike some old cards that used RFID (radio-frequency identification) technology, the new technology makes it impossible for high-tech thieves to read your credit card data from a distance. No need for a “special” wallet to protect your chip-enabled card.
The chip cards are the standard overseasThis link opens a third-party website that is not affiliated with STCU., where they’re also known as smart cards, chip-enabled cards, and EMV cards (for Europay, MasterCard, and Visa). But the United States is just transitioning to them now.
Chip-and-PIN v. chip-and-signature cards
Not all chip cards work the same.
While they all come embedded with that microchip that creates the unique codes, some also require a signature, while others require you to enter a personal identification number to verify that you’re the cardholder.
Many card issuers are rolling out chip-and-signature cards, Jones said, because they figure they’re easier for cardholders to get used to. STCU is transitioning to chip-and-PIN cards, because they’re more secure, he said. A PIN is harder to guess than a signature is to fake – and you might have noticed merchants rarely verifying your scrawl at the cash register.
Change comes slowly to checkouts
Whether your chip card requires a PIN or a signature, it also requires your favorite retailers to invest in some new equipment to read the chip.
While there’s no legal mandate for card issuers and merchants to adopt chip-card technology – and install terminals that can read your microchip – they have incentive.
Historically, liability for counterfeit-card fraud rested with card issuers. But starting in October 2015, that liability shiftedThis link opens a third-party website that is not affiliated with STCU..
“Now whoever is the least secure, whether it’s the issuer or the merchant, is going to be the one who absorbs the fraud in a transaction where the customer has a chip card,” Jones said.
There are exceptions. Self-service gas pumps, for example, have until 2017 to accept chip cards before the gas stationsThis link opens a third-party website that is not affiliated with STCU. are liable for fraud.
When there’s a choice, choose the chip
The United States is in conversion mode, with some businesses choosing to accept the liability risk – for now, at least – rather than buy the new devices.
That’s why the chip cards also have magnetic strips, and why the magnetic strips still work on most terminals. But it’s safer to use the chip rather than the stripe when you can.
“Until we pass a critical mass, where enough merchants are accepting chip cards, then you’re going to see both forms of technology in place,” Jones said. “Ideally, maybe in the next five years, we’ll see the magstripe go away.”