- 20 November, 2016
How many times in the last year or so have you been asked if your credit card has a chip? Credit card chips have only become popular in the last few years, but while the banks are rolling out most cards with these chips, only a small percentage of retailers have the machines to use them.
But what’s the deal with those chips? Why does your credit card have a chip?
Chip cards are being rolled out as a means of combatting identity theft and credit card fraud. Criminals have found ways to take advantage of credit card use. They can install “skimmers” on legitimate credit card readers and ATMs. These skimmers are used to steal your credit card number and PIN, giving them access to your account. The sad truth is that normal credit cards are NOT secure, meaning your information and money are at risk.
With a chipped credit card, you get an added layer of security. In addition to the magnetic stripe and the PIN code you need to enter, the chip interacts with the payment processing device. The processing system interacts with the chip, reading its contents and ensuring that it’s genuine. The chip authorizes the transaction, but without the chip the transaction won’t go through. Best of all, the chip generates a single-use code, one that is different every time you try to pay with the card. That means, there’s no way your card can be used again, as the single-use code will be different next time you pay. If anyone steals your credit card information, they won’t be able to use it thanks to the chip.
Does the chip make a difference? It certainly seems so! According to the UK Card Association, the introduction of the chip decreased credit card fraud by 50% in the UK alone. If everyone made the switch to the chipped cards, there is a very good chance we would see a decrease in credit card fraud in the U.S. as well.
The sad truth is that the government isn’t making the chipped cards mandatory in the United States. MasterCard and VISA are rolling out more cards with chips, and more and more retailers are purchasing machines that work with chips. This is because the merchants are now liable for credit card fraud, not the banks or customers.
