How do the new chips on debit cards and credit cards protect against fraud?

If you’ve been to a store recently, you’ve likely witnessed a frustrated consumer repeatedly sliding their credit or debit card into a resistant machine. While we used to struggle with the magnetic stripe, new users are inserting shiny cards into machines short end first — the result of which, if inserted incorrectly, is a car alarm like-buzz of rejection. And while there may be a bit of a learning curve for some, these cards, referred to as EMV-chipped cards, short for Europay, MasterCard, and Visa, the entities that created this new protocol,  aren’t going anywhere anytime soon. 

The need for change
Estimates indicate that half of all credit card fraud worldwide occurs in the Unites States, a shocking number given our relative size, and all thanks to that handy magnetic stripe. The stripe’s lack of security has prompted a change, especially given the transition of liability for fraud committed by way of magnetic-stripe credit and debit cards from banks to stores. While you will likely see both a chip and a magnetic stripe on your card, the stripes will soon disappear. 

What’s so great about the chip?
The new chipped cards offer a superior technology in terms of security because they don’t store your information. Each time the card is swiped, the computer chip generates an individual transaction ID and encrypts your personal information. Should a hacker intersect the ID, they’d find it utterly useless. As an added security measure, some cards will require you to enter your PIN, making it even more unlikely that criminals are using your personal information. 

Finally, some EMV chipped cards also utilize near field communication, which transfers money from your bank to a retailer via radio wave technology. For a hacker to access your information, they’d have to be inches away from the transaction. 

How do I use my new card? 
Think of using your new card as a slight variation on using an ATM. Put your card into the machines (after ensuring that it chip compatible) and remove your card only when the machine instructs you to do so — it can take a minute. 

Image via 

Is there a timeline for these things?
Most banks and institutions have already issued the chipped cards (take a look — you may not even know you have one). Others are waiting until the current customer cards expire. 

Retail institutions may be slower to adapt the new machines, the shifts in liability are meant to encourage the transition. Expect the entire process to be complete within two years. 

What if I’m traveling internationally?
Many customers in the United States are concerned about international travel and card compatibility. While the United States is actually behind other countries in the use of EMV chips, the lack of PIN can create problems for some travelers.

If, for example, you run your card on a machine that requires both a chip and a PIN and your card is only equipped with a chip system (as opposed to a chip and PIN) your payment may be rejected. To avoid these problems, be sure to check the technology most prevalent in the country to which you are traveling. 

While this may provide a temporary inconvenience, rest assured — chip and PIN systems will eventually be commonplace across the globe. 

Change is good!
Yes, change can be frustrating and difficult, but ultimately, EMV chips help to protect consumers. By taking the time to learn how to master your card now, you ensure a future relatively free from fraudulent transactions and criminal activity. Happy shopping!

By Heather Hamilton