DEFINITION of Integrated Circuit Card

An integrated circuit card is a type of payment or identification card that has an embedded circuit, such as a computer chip. Integrated circuit cards are made of plastic or a similar material and are most often associated with specific credit cards known as EMV cards.

BREAKING DOWN Integrated Circuit Card

Integrated circuit cards allow the storage of information on the card itself. For example, a consumer's information on this type of payment card is accessed when the card is used in a card scanner. Combined with other security measures such as a PIN or password, the chip allows the secure transmission of personal and financial information.

Europay MasterCard Visa (EMV) cards are known as “smart cards” due to their integrated circuit chip (ICC). Though they were initially used in Europe and Asia, their use has spread with increasing frequency in the United States. EMV has become a standard in payment card security technology and has been deployed by financial institutions such as banks and credit card providers.

While integrated circuit cards are often associated with credit and debit cards, they are also used in a variety of other settings. For example, employees may be assigned an identification card that they must scan in order to be allowed inside a secure building.

How Integrated Circuit Cards Are Used to Combat Identity Theft

Integrated circuit cards are seeing more use at retail locations as more chip readers are introduced to accommodate this form of payment security. Such cards typically include a magnetic stripe as well to allow transactions to be completed if a chip reader is not available at a retailer’s store. Integrated circuit cards are designed to offer increased security over magnetic stripe payment cards, which can have their information skimmed by fraudsters and then used to access a consumer’s accounts.

Magnetic stripe cards have been frequently duplicated, allowing identity thieves to create copies of the original card, as well as sell the account information they have illegally accessed. The use of the embedded chip in an integrated circuit card can reduce such fraud as it makes skimming a less effective means of accessing account information. Transactions with an integrated circuit card require the chip to be inserted into the chip reader, where available, thus making the magnetic stripe a backup feature to be used only when a chip reader is not available. Since fraudsters cannot access the information secured by integrated circuit card as easily as a magnetic stripe, they're not able to authenticate their illicit transactions.