Chip cards are the “new normal” for using your bank card. While this is likely nothing new for readers in Europe, some Americans are only now receiving their chip cards from their banks.

Although it may seem like a tedious switch, there are many reasons why experts recommend retailers encourage EMV card readers. Learning more about what this means and what a chip card is helps you stay on top of your security.

What Is a Chip Card?

Chip cards refer to plastic debit or credit cards that have a unique EMV microchip incorporated in them. You differentiate these from traditional credit cards because chip cards have a small, lined square on the side.

“EMV” is an abbreviation for the three founders of the technology, Europay, MasterCard, and Visa. Although the technology existed back in the 1990s, it came to the USA relatively recently for many cardholders. There are two types of chip cards: chip-and-signature cards, and chip-and-PIN cards. Both use the same chip technology but require different methods of transaction authentication.

As their name suggests, chip-and-signature require a signature while chip-and-PIN requires a Personal Identification Number (PIN). Chip-and-PIN cards are more common and considered more secure as finding out passwords is more complicated than faking a signature. These microchips encrypt information differently, adding an extra layer of security for data protection. Chip cards also include the magnetic strip older credit and debit cards used that allow you to slide them through a card reader.

EMV cards offer two different forms of payment (in addition to allowing cardholders to pay with their smartphones). “Contact payments” involve inserting the card chip-up into a designated slot on an EMV card reader. “Contactless payments” allow cardholders to use their cards while hovering them above the machine.

If someone does not have a functioning EMV card reader, chip cards work with traditional card readers.

Most businesses upgraded their card readers in the last year to keep up with the demands for data protection and avoid potential scandals.

Why Did My Bank Send Me a Chip Card?

Banks are merely keeping up with technological advances. While chip cards may be new in the United States, they've been standard practice in other countries for a long time. The chief reason behind the USA’s reluctance to get with the program was heavily due to the sheer cost of the shift. After analysis determined it worked out well in other countries, banks couldn’t ignore the objective benefits from the change.

It is in your bank’s interest to encourage you to use a chip card. Chip cards better protect your data, saving you (and your financial institution) the hassle of a data breach.

Are Chip Cards More Secure Than Traditional Bank Cards?

How are chip cards more secure than traditional cards? First and foremost, chip cards are difficult to “skim.” Skimming refers to a technique of identity theft where thieves install an illegal device that can capture someone’s banking details on card readers (often as ATMs or gas stations).

Victims may withdraw money or complete a transaction with their card like usual without ever realizing what happened. There are some “red flags” that indicate a skimmer is present, such as something hanging from the machine, sticky residue, thicker keypads, or clunky attachments. Sometimes, skimmer installation is too subtle to notice. The skimmers read the static data carried by the magnetic strip saving your card information, and a thin tracking system on the PIN pad records your typing movements.

Fraudsters take this information and clone cards which they can use to make purchases on your account as though it were their card. Thieves often use the clones for small purchases that one wouldn’t notice immediately (and no bank would flag as suspicious activity). When someone realizes the theft, the damage may be severe and difficult to get your money.

It’s challenging for fraudsters to clone chip cards because of their design. Also, stealing the information in the first place is a hassle. Because of the encryption technology employed, it’s challenging for someone to clone without having direct access to the card. So long as you don’t swipe your chip card, skimmers cannot collect information from your chip cards.

Are Chip Cards Completely Secure?

While chip cards greatly enhance security, they can’t completely prevent fraud.

The design of a chip may make it difficult for thieves to duplicate cards, but they can’t stop people from using your card information. For example, if someone has all of your banking information and knows personal data, like your name and address, making a quick transaction on Amazon or eBay is pretty straightforward.

Banks do continue to monitor transaction activity despite the enhanced security and will flag fraudulent purchases. While your bank may prevent someone from randomly draining your account on gift cards worth thousands of dollars, but small, unnoticed purchases may add up over time and are difficult to reverse.

For these “card not present” scams, where people use your information to access funds, there is nothing you can do but try to keep your information private.

While data breaches are sometimes unavoidable for consumers, educating yourself on how to avoid phishing scams and keeping your information unsaved on e-commerce accounts and public computers are great preventative measures.

You do not reap the benefits of EMV technology if you use the cards via the traditional magnetic stripe. This form of payment functions no differently from the traditional, thus not providing any additional encryption.

Overall, EMV chips are much better than traditional card payments and reduce the chances of someone stealing your data.

Should I Use My Chip Card?

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It’s a very good idea for you to use your chip card. While some fraudulent cases are unavoidable, EMV chips provide significantly more protection.

EMV chip cards are more secure than traditional debit and credit cards, plus contactless payments are more hygienic. There is a reason why EMV chips are the new standard, and you should make sure you use them where possible.