What Is a Chip-And-PIN Card?

A chip-and-PIN card is a credit or debit card that contains data embedded in a microchip and requires the consumer to enter a personal identification number (PIN) to complete the transaction. A chip-and-PIN card, also called an EMV microchip card (Europay, Mastercard and Visa), is considered more secure than a magnetic stripe credit card because of both the technology in the chip and the requirement to enter a unique PIN.

Key Takeaways

  • A chip-and-PIN card uses a data-enabled microchip and requires consumers to provide a signature to complete transactions.
  • These cards are an improvement in security from traditional magnetic stripe cards because of the encryption and digital technology the microchip provides.
  • A Chip-And-PIN requires a personal identification number to be inputted, rather than a signature that is much harder to verify.

Understanding Chip-And-PIN

A traditional magnetic stripe card uses static data embedded in magnetic particles and suspended in plastic film; this static data is relatively easy to copy and embed in a counterfeit card. A credit card chip uses an encrypted digital signature with a nonreusable transaction code unique to each purchase, making card counterfeiting relatively difficult.

Chip-and-PIN cards are the same size and shape as magnetic stripe credit cards and also look similar in other ways: They contain the card issuer’s logo (e.g., Chase Bank), the payment processor’s logo (e.g., Visa), the cardholder’s name, the credit card number and an expiration date. The key difference is that chip-and-PIN cards, as well as their close relatives, the chip-and-signature card, contain a small, square-shaped microchip that’s about 0.5 inches per side. Chip-and-signature cards are similar to chip-and-PIN cards except they require the cardholder’s signature, like a traditional credit card, and do not require the cardholder to enter a PIN.

Credit or debit cards that contain microchips can be used for online purchases, but for in-store transactions, the merchant needs a special card terminal with a slot similar to that of an ATM so the machine can read the microchip. Some chip cards issued in the United States also contain magnetic stripes so the cards can be used with older equipment. Some chip-and-PIN cards also work with near-field communication technology that lets the user pay by simply tapping the card against a terminal.

Chip-and-Signature Cards vs Chip-and-PIN Cards

Chip-and-signature is a different type of card verification process from Chip-and-PIN. Card verification modes can be described as the process used to insure that the actual account holder is using the card and making the purchase, and not a thief.

The main difference between the two cards is that instead of a signature to complete a transaction, chip-and-PIN cards require the cardholder to enter a personal identification number, which adds an additional layer of security to combat fraud than a chip-and-signature card. Anyone could forge a signature at a point-of-sale, and most cashiers do not confirm whether the digital signature matches the account holder's signature on the back of the card. Conversely, duplicating a PIN is much more difficult and something the consumer has additional control over, for instance, consumers are able to change their PIN.