The Advantages of a Chip and PIN Credit Card

  • 5 min read

Credit card account holders are starting to find a new type of card for their account. These are called EMV chip cards and they have been the global standard outside of the US and Canada for some time.

These chips provide information to a payment terminal that is combined with a PIN like you would use with a debit card. Both are required for the purchase to go through, enhancing the security in point-of-sale transactions.

Here are some questions and answers to help you prepare for the conversion to these cards as they become the payment standard over the next months and years in the US and Canada.

What does EMV mean? EMV stands for Europay Mastercard and Visa. It is simply an abbreviation of the primary credit card processors that operate globally today. Many lenders simply refer to these credit cards as “smart cards” to avoid any confusion. These 3 organizations do not extend any credit to consumers. They simply process the payments that consumers make.

Why is an EMV chip card more secure? These credit cards use a unique transaction code for each purchase that is only used once. Maybe you’ve heard of the credit cards that issue a unique card number for every online credit purchase – this takes the idea to the next level. Even if the data off of the chip is stolen in a way that is similar to the Target or Home Depot data hack, the information can’t be used because it only applied to that one purchase.

Can I still use a signature instead of a PIN? Some credit cards may choose to allow their account holders to still use a signature as verification of personal identity with an EMV chip card. To counter identity theft issues at the point-of-sale, these cards may carry a picture of the consumer in addition to the chip to help protect against credit card fraud. The PIN method with the chip card tends to be the one that is preferred the most.

What happens if my EMV chip card is stolen? In most instances, nothing will happen. Discover Bank researched how EMV cards were used in Europe and compared it to data from the United States. They found that while US credit card fraud went up 47% for non chip cards, European credit card fraud declined by 80%. Any thief must have your PIN number or be able to replicate your signature to be able to successfully use this type of credit card.

Will I need to change my purchasing habits? Not at all. Preparing for an EMV chip card is easy. Just use it like you would any other credit card. At worst, you may be asked to enter more data, including passwords, when making an online purchase to verify that you are the person entitled to use that credit card.

How long will I have before I get my EMV chip card. There are over 20 million smart cards that have been issued to US consumers already. From 2016 – 2018, the transition process will be implemented and most financial institutions believe that US consumers will all be using this type of credit card by 2020.

EMV chip cards are going to be the new standard. When you apply for your preferred credit card today, ask about whether or not this technology is being implemented for new accounts.

Today the average American credit card and the average consumer has a plastic card with raised numbers and a signature line on the back. That signature is the only thing that stands between a legitimate purchase and a fraudulent purchase. This also means that online purchases are very easy to be misrepresented. With chip and PIN technology coming to the US market in the near future, many consumers are concerned about the practical application of these credit cards.

Here are a few things you will need to know about the transition from a signature card to a chip and PIN credit card.

#1. It’s a lot like using a debit card. If you’ve got a debit card that accesses your checking account, then you’re familiar with the process of what a purchase with a chip and PIN credit card will be like. Once you swipe the card, the first line of defense is the chip technology that will help to verify that you are the person authorized to use the card. The second line of defense is the PIN that you would input at the register, just like a debit PIN.

#2. Many chip and PIN cards have a photo ID on them. For a third line of security, the new line of chip and PIN credit cards have been including photographs of account holders on the face of the card.

#3. Wave technology becomes a lot more secure. Part of the chip and PIN technology includes an RFID signal that will help to transmit account information through a pay terminal. Even if a thief can get their hands on this account information with an RFID receiver, they won’t be able to do much with the data because they’ll still need the PIN to access the account and that number isn’t included with with the radio signal

#4. It’s already being used successfully. The United States is actually one of the last markets to be implementing this security change with credit cards. Some American credit cards can’t actually be used in certain European and Canadian markets because American cards are of the signature design and the payment terminals in many other countries are for chip and PIN cards only.

Christopher - BSc, MBA

With over two decades of combined Big 5 Banking and Agency experience, Christopher launched Underbanked® to cut through the noise and complexity of financial information. Christopher has an MBA degree from McMaster University and BSc. from Western University in Canada.