4 Ways Chip Credit Cards Make Life Easier

By Damian Davila. Last updated 18 September 2015. 1 comment

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We should have seen it coming.

While U.S. credit and debit card users started getting notices about the switch to chip-and-PIN as early as 2014, users in other countries, such as Mexico, Brazil, and Germany, have already been using chip technology for several years. This technology has proven successful in reducing fraud in over 130 nations around the world.

Given the major hacks of credit card information in 2014 (for example, a whopping 56 million credit and debit cards were affected by a data breach at Home Depot in September 2014), the switch to chip technology is a big deal for U.S. consumers. Here are four major advantages of your new chip credit and debit cards.

See also: Best Credit Cards With EMV Chips

1. Leverage New Technology

By using credit and debit cards with embossed numbers and a magnetic stripe, you're giving credit card thieves a fair chance at getting your info. Current cards use technology that dates back to the 1960s.

Criminals have had over 50 years to develop portable magnetic readers of stripe cards that they can use on the fly to make counterfeit credit cards. In Europe, chip technology has proven so effective against fraud that over 80% of cards issued in Europe use the chip technology. For example, through use of chip technology, the U.K. lowered counterfeit card fraud losses on U.K.-issued cards from a high of 169.8 billion euros in 2008 to 47.8 million euros in 2014.

This is why some places in Europe with standalone pay stations, such as train stations, no longer accept purchases through card swipes.

2. Prevent Card Info Theft From "Swiping"

A common way for thieves to get ahold of your credit card data is to distract you and swipe your card in a credit card reader of their own. Malicious employees at retail stores, restaurants, and other businesses have been caught gathering "swipes" and selling each one of them for $20 to $40.

To prevent this type of fraud, chip credit and debit cards have an encrypted microchip that is very difficult to counterfeit. By sticking with pay terminals that accept chip technology, your card never leaves your sight (you stick the card into the terminal) and you're also required to enter your personal identification number (PIN) for all your chip card transactions.

By using chip cards, you keep your card with you at all times, effectively reducing the risk of "swiping" from malicious third parties.

3. Extra Protection Through PIN

Let's imagine another scenario in which a pickpocket runs away with your purse or wallet, either one containing your chip card. Assuming that theft took place in a city with a high percentage of chip terminals, the pickpocket wouldn't be able to use the card without its PIN.

Think of your chip credit or debit card as an ATM card. When you use your ATM card to withdraw money from your bank account, you stick the card into the ATM and enter your PIN. Without the PIN, you can't take out any money. More importantly, most card companies will block any chip card after three failed PIN entries. To reset your PIN, you'll need to contact your financial institution and provide personal information to confirm your identity.

Of course, the additional security that comes with a PIN is only as good as your habit of keeping that PIN private. So, never share your PIN with anybody and don't write you PIN anywhere on the card.

4. Forced Implementation of Chip Technology

For all of the benefits of chip technology to materialize, more and more American businesses need to implement pay terminals that accept the chip technology. President Obama set an October 2015 deadline for U.S. businesses to comply with implementation of chip technology (also known as EMV, which stands for Europay, MasterCard, and Visa, the companies that collaborated to develop this technology two decades ago).

Businesses that don't comply by this deadline will assume liability for costs associated with counterfeit and potentially lost or stolen card transactions. To avoid any penalties, several companies are updating their pay terminals or already have completed the update. For example, Target finished its migration to EMV on August 8, 2015.

Chip technology is a necessary update to combat credit card fraud. It's understandable that it will take a couple of years until the small mom-and-pop stores and gas stations catch up with the migration to EMV. Once Americans are able to use chip-and-PIN to make most of their purchases, we will enjoy a lower rate of credit card fraud.

How do you keep your credit card information secure? Please share in the comments or tweet us at @Wisebread.

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Guest's picture
Selene Montgomery

I have two credit cards with the 'chip' that I use frequently. I have never had to use a PIN with either one. Other than not leaving my sight, I'm not sure they are that much more secure than the older ones without the chip. I definitely wish merchants would ask for ID along with the card every time, but that is a rarity also.

Damian Davila's picture

Hi Selene, what you're describing is happening too often because while many retailers have swapped their payment terminals with ones that can process chip-and-PIN payments, very few retailers are actually able to process those payments yet. Very few retailers are already processing chip cards the way they should. From my experience, only Target and Walgreens are encouraging people with chip cards to use the chip-and-PIN process.