Whether we like it or not, financial institutions are converting to debit and credit cards embedded with computer chips in addition to the magnetic strip, and merchants are installing new payment terminals to accept the chips. These new cards, sometimes referred to as EMV Cards or Chip Cards, are becoming the new normal and have helped significantly reduce card fraud in countries around the world. In fact, the United States is the last major nation to adopt this technology.
The first few times I had to use the chip portion of my card, it took me a minute to figure out the new process. Leaving the card in the reader was an entirely new experience, and the noise some of the machines make can be quite irritating! Even though change can be difficult, I’m still glad we’re switching over to the new technology. Here’s why:
Europay, Mastercard and Visa created the EMV cards as a way to increase consumer protection. Since most card compromises happen when your card information is stolen from a merchant’s system, these new chip cards keep thieves from getting your card or account numbers.
How do these cards work exactly? Let’s first talk about how a magnetic strip card works. When you make a purchase with a magnetic strip card (by sliding the card in the payment terminal), you give the merchant your card number and permission to take a certain amount from your account. The merchant then sends that information to a payment processor (like Visa), and from there it gets sent to your financial institution.
With the new chip cards, you insert the chip end of the card into the payment terminal and leave it there during the transaction. The chip in your card creates a unique code to give to the merchant. The merchant will then use that unique code to collect the money from the payment processor. This process is called tokenization, and it’s quite a bit safer for you because your card number and account number are not being provided. Additionally, cards embedded with the chip are much more difficult to counterfeit.
Even with the new rules that went in to effect in October 2015, it will still take some time for everything to convert over to the chip-based system. While merchants are adjusting to this new system, we’ll still have to deal with the confusion of not knowing whether to slide or insert our cards when we step up to the checkout counter. But the confusion is a lot better than having to switch your card number once a year (or more!) because it’s been compromised.
