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How Have Credit Card Chips Improved Security?

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If your credit card doesn’t have a microchip in it now, it likely will very soon. Also called EMV cards, these chip-embedded cards developed by companies such as Europay, Mastercard and Visa contain security measures that were impossible with the old magnetic stripe cards.

More Secure Transactions

Magnetic stripe cards leave your credit card information vulnerable. Using an inexpensive device called a skimmer, thieves can lift the information from the magnetic stripe and duplicate it on a blank card. Skimmers are often placed on top of a merchant’s credit card scanner without the merchant’s knowledge. Thieves can then use that information for online credit card fraud, or by creating a duplicate, counterfeit card, without you even knowing about it until you get your bill.

The information in credit card chips is encrypted and doesn’t reveal your credit card information. When the chip is read by a credit card chip reader, it issues a one-time-use token. Even if a thief is able to intercept that token, it’s useless. The expired token does not contain your credit card information and cannot be used to make a second purchase6.

Theft Reduction by the Numbers

There are not yet any reliable statistics to show how well credit card chips are reducing credit card theft because, at the time of publication, the technology is still being rolled out. Estimates from June of 2016 reveal that about half of all U.S. merchants have the technology required to process the chip-enabled cards, while the other half still use the magnetic stripe scanners. By 2017, 90 percent of merchants should have adopted the EMV technology.

In the U.K., however, credit card chips have been present for several years. The U.K. Cards Association reported that overall fraud with credit and debit cards fell by 28 percent from 2008 to 2009, when usage was first widespread. Fraud involving counterfeit cards fell by over half.

Not a Cure-All for Theft and Fraud

Of course, credit and debit cards are only one way for thieves to get access to your money. While card fraud in the U.K. fell dramatically in 2009, it’s important to note that online fraud rose by 14 percent during the same period.

While the EMV cards are difficult for thieves to access, this is not to say it’s impossible. In 2011, a criminal ring in France was able to get around the security by attaching specially-designed microchips to at least 25 counterfeit chip-embedded cards. They were able to get over $680,000 before they were caught.

Signatures vs. PINs

As chip-embedded cards first rolled out in the U.S., there was lively debate about the effectiveness of cards that required a signature, compared to cards requiring a PIN, or Personal Identification Number. PINs are more secure in the event that someone steals your credit card, because it’s generally much easier to forge a signature than it is to figure out a 4-digit PIN. However, most people report cards once they discover that they are stolen or lost, making credit card theft a minor risk. Signature-and-PIN cards that are chip-embedded may increase cyber security and reduce counterfeit card fraud.

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