Chip and PIN is another name for your new EMV compliant credit card.
There are many names for this new type of card:
- Smart card
- EMV card
- Chip card
- IC card
No matter what you call your card, though, it has a tiny computer chip embedded in the front of it. And instead of storing your credit card’s financial data on magnetic stripes, it’s stored and encrypted on integrated circuits in this chip.
The chip uses “dynamic data,” meaning each transaction is unique and cannot be reproduced. So if someone manages to remotely steal your information at a point of sale and tries to use it elsewhere… the transaction is going to be denied.
Using a chip and PIN is just the same as you’d use your regular (nearly outdated) debit card, but instead of swiping, you insert it.
When it comes to credit cards, there have always been threats to our security. With every new year comes a new security threat, it seems.
Criminals have become quite crafty at devising ways to get into our personal lives and personal accounts through our credit cards by the information stored on them.
Before we knew about chip and PIN cards (or chip and signature cards, depending on how each card is authenticated) we all relied on credit cards with magnetic stripes. These we swiped through a reader at the store.
Now, with chip and PINs, we dip, or insert. Unless, you have a contactless card, which uses radio-frequency ID technology.
The magnetic stripes on these “old” cards stores all of our personal information which is connected to our credit card account.
Now with chip and PIN cards, they have what is called an EMV chip built into the card which stores all the same personal information on integrated circuits. This is a step up from traditional magnetic stripe cards, for sure.
The magnetic stripe can be used for backwards compatibility, meaning if a business (not yours, I hope) is still not EMV compliant (the deadline for this was October 1, 2015) you can still use your smart card by swiping it instead of dipping it. But the magnetic stripes on these new cards don’t hold the same information they used to.
Now when you go to the grocery store, the card readers have a slot on them where you insert or “dip” your card into.
The machine reads the information on the EMV chip and boom! The red velvet cake ice cream they bought “for the wife” is now theirs. I mean, hers.
Same way we used to do it, but different. We’re still transferring money, but now it’s encrypted money.
These cards will eventually require the card owner to enter a four digit “PIN” number during purchases to verify they are the account holder. At least this is the first method for verification.
They do also have a signature method in place as a secondary option for verification.
Credit card companies have had to switch to these kinds of cards because of all the fraud and counterfeiting with traditional magnetic stripe cards. These malpractices have only gotten more severe in recent years, and it’s been the financial institutions paying for the fraud instead of the business owner.
You can imagine… the institutions are tired of paying for it, especially if it’s all preventable.
This fraud was achieved in many ways, one of which was through equipment available on the black market which copies magnetic stripe cards. Once copied, the thief would then turn around and make illegal, fraudulent purchases.
Europe and most other countries already use smart cards. The US’s shift to these EMV cards has been underway for some time.
Because chip and PIN cards are only activated for purchase once your customer types in their PIN number, the threat of fraud is significantly reduced.
Credit card companies have already noticed a significant reduction in fraudulent purchases since they introduced them in Europe almost a decade ago.
Just think about it for a second. Compare a transaction you’ve had recently where you (or someone else) uses your/their card at a restaurant or gas station.
How often do you get asked for your ID to compare with the name on the card?
I know I don’t very often. Criminals know this too. At gas stations or the grocery store, literally anyone can run your debit card as “credit” and no PIN is required. The clerks rarely ask for ID to verify the names on both match.
With chip and PIN cards, this is no longer the case. The only person who can use that card is the one who knows the four digit pin number.
It doesn’t take a rocket scientist to see how much better this technology is than the traditional swipe cards.
As a victim of credit card fraud myself, I am very happy about this transition to chip and PIN cards. I feel much more confident knowing I am the only person who can use my card.
For businesses, the transition to EMV technology means getting new equipment capable of processing these cards.
For consumers, it means getting new cards, activating them, and learning how to dip our cards (or tap them, if your card is contactless).
Even if you’ve had some issues with the transition at first, once the move has fully been made to chip and PIN cards, it will only get easier on us all. And fraud will go way down.
To learn more, call us here at RedFynn: (888) 510-9871