What is a Chip Card
A chip card is a standard-size plastic debit card or credit card which contains an embedded microchip as well as a traditional magnetic stripe. The chip encrypts information to increase data security when making transactions at stores, terminals, or automated teller machines (ATMs). Not all card readers are chip enabled. Chip cards also are known as smart cards, chip-and-pin cards, chip-and-signature cards, and Europay, MasterCard, Visa (EMV) cards.
BREAKING DOWN Chip Card
The chip card is the global standard for chip-based debit and credit transactions. The update to chip-embedded technology is a joint effort by Europay, MasterCard, and Visa. This endeavor hopes to ensure security and worldwide acceptance of MasterCard and Visa Cards and expand their use everywhere.
A Europay, MasterCard, Visa (EMV) terminal is a chip-enabled monitor which transmits data from the store, ATM or other use point to the merchant's and card provider's site. The adoption of chip-enabled point-of-sale terminals (POS) and automated teller machines (ATMs) are becoming widespread throughout the U.S. The chip card offers greater acceptance and security when traveling. Currently, chip technology is prevalent in over 130 countries, including Canada, Mexico, and the United Kingdom.
How to Use a Chip Card
Chip cards will still work at terminals and ATMs where only magnetic stripe transactions are accepted. If a retailer has a chip-enabled terminal, the user inserts the chip end of the card face-up into the reader slot of the terminal and follows the prompts. If the store does not have a chip reading terminal, the user swipes the card using the magnetic stripe. Users may be required to enter a personal identification number (PIN) or sign to authorize the transaction and complete the purchase.
For transactions made by phone or online, there are no changes. The chip card functions in the same manner as past credit and debit cards. Also, there are no additional fees associated with a chip card issuance or transactions.
Sleep Soundly with Chip Card Security
Chip card technology provides an additional layer of security when used at a chip-enabled terminal. This encryption security is in addition to the fraud prevention monitoring already offered by card providers. In most cases, purchases have coverage for fraudulent usage. This coverage limits customer liability in the event of theft. Embedded chips help merchants avoid card-present fraud, but other lines of protection must come from other methods to prevent card-not-present-fraud.
Banks monitor the chip card's activity by the location use, the purchase amount, and the merchant charging the account. If any deceptive activity happens, the card provider will attempt to contact the customer. The bank issues a credit to the chip card account after verification of fraudulent charges.
Chip technology may help reduce certain types of fraud resulting from data breaches. However, it will not prevent a data breach. The enhanced security of the chip itself contains counterfeiting preventive measures.
The chip makes transactions more secure by encrypting information when used at a chip-enabled terminal. Chip card technology is not yet a locator system. Until engaged in a reader, the card cannot detect its location for security or advertising purposes. The chip is limited to supporting authentication of card data during purchases. Usually, this type of card is easily replaceable in the event of loss or damage.