So what the heck’s a chip card anyway?

September 30, 2015 |

What is a chip card and how does this new payment technology benefit consumers - and travelers in particular? I was driving in England the summer of 2008 and stopped at a travel center for fuel and food. When I tried to pay with my American bank-issued debit card, I was unceremoniously rebuked by the fast food employee behind the counter because my card didn’t have a chip in it. I didn’t even know what that meant at the time, but as I continued to travel through Europe it became clear that they had something we didn’t. Fast forward 7 years and chip cards – or EMV cards – are starting to become more and more prevalent in the United States.

So what’s that chip all about? This is a very low tech explanation, but the magnetic strip on the back of your credit or debit card contains enough information about your account to allow a merchant to check with your bank to make sure you’ve got the funds to pay and then to complete the transaction. The data on that stripe is static – it is always the same. Once some nefarious individual gets ahold of that information, the only way to rectify the situation is by getting a new card. With chip technology, a unique code gets issued with each transaction. Once that code has been used, it won’t work again. This, incidentally, is the very similar to way that mobile payment services like Apple Pay and Android Pay work, making them very secure options as well – even more secure, in fact, as they also require your fingerprint or access code on your phone or wearable to generate that unique transaction code. Check out our introduction to mobile payments here.

This week, on October 1st, the liability for fraudulent card transactions will shift to the weakest link – whichever party is the least EMV compliant. If your bank hasn’t issued you a chip card and fraud happens, it could be your bank that’s liable. If your pharmacy or supermarket requires you to swipe instead of dip, they may be liable.

How do you use a chip card? It depends. Most of the time, you will dip it. That means you’ll look for a little slot – usually on the bottom of the point of sale terminal and then you’ll “dip” your card in. At this point in time, dipping your chip card is a pain. It takes forever – you have to wait until the transaction is complete to withdraw your card rather than simply swiping it through the reader. Sometimes you’ll withdraw it too early and the cashier will roll their eyes at you and have you do it again. That last sentence may or may not have come from personal experience. If your bank is forward-thinking enough to offer NFC-enabled chip cards (also the tech that powers Apple Pay and Android Pay), you can then simply tap the card reader and initiate payment – that is, if the reader has that capability. We’re still in early stages here and things will advance. For now, you’ll usually be able to pay by dipping.

In case all of this chip and dip talk is making you hungry, here are some great recipes that I found on Pinterest. 

Most U.S.-issued chip cards will be chip and signature, meaning that after you dip, you then have to sign. Others may also be chip and PIN-enabled, meaning that after you’ve dipped (or tapped), you’ll have to enter a 4-digit PIN. That’s just one extra layer of security.

In addition to security and fraud prevention, are there any other benefits? Once technology evolves and merchants get on board with this technology I think it will ultimately become a faster and more efficient process. At the places where I can use Apple Pay, for instance, I am able to simply tap the terminal, then use my fingerprint to authenticate. The payment happens and I’m out the door. It’s great. Credit cards may not get quite that efficient, but they’ll get better.

Another benefit of all this – especially for travelers – is that you can take your card all over the world and not have to worry that they won’t have a swiping machine. It should be noted that chip and PIN cards are more common in Europe and it’s a little unclear whether or not chip and signature cards will always work there – particularly at self service kiosks where you don’t have a human to take your payment. Visa and Mastercard say that they will, but you might want to have a back-up plan just in case.

Like any new (or new to us) technology, chip cards are going to take a little getting used to. Ultimately, the benefits will outweigh those growing pains. Has your bank issued you a new card yet? What experiences have you had with chip payment technology? Let me know in the comments or on Twitter @TandTNews.