How A Chip Can Secure You

By BankBazaar | November 2, 2016

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Did you know that Credit or Debit Cards with a magnetic stripe get worn out after a point? You’ve probably seen several people using their magnetic stripe cards at retail outlets only to find that the card was never recognised. Well, guess what kind of card this will never happen with? A Chip card, of course.

What Is A Chip Card?

A chip card is a Credit or a Debit Card with a microchip embedded in it. This chip is encrypted to secure it against theft. You might have noticed a small, metallic square on some cards (typically in gold). This is the chip.

Chip cards create unique codes for every transaction, making each transaction more secure. These cards, also known as EMV (EuroPay, MasterCard, and Visa) Cards, have to be inserted into a reader for the card information to be read.

Why Is The World Shifting To The Chip?

The Reserve Bank of India (RBI) has asked all banks to move to chip-based cards from January this year. This is in line with global practices. Most countries including the US, have migrated to chip-based cards. Consider this: 80% of the cards in Europe are chip cards. This is mainly because chip cards can help prevent counterfeit frauds and rackets involving stolen or lost cards. The losses due to counterfeit card frauds in Europe had fallen significantly to 47 billion Euros in 2014 from the 169 billion Euros it was in 2008. This was mainly due to the use of chip-based cards issued to users. Here’s why you should also be looking at getting a chip card.

Additional Reading: How To Protect Your Credit Card

Turn Over A New Leaf

Magnetic stripes involve old technology that dates back to 1960. So, thieves have had a lot of time to master extracting information from such cards. Do you know that criminals can extract all card information from a magnetic stripe card with a single swipe? Wait. There’s more. Con men also use portable magnetic card readers to make counterfeit cards of magnetic stripe cards. This is not possible with a chip card. Chip cards have to be inserted into point-of-sale terminals to retrieve information. This is called ‘card dipping’. When this happens, information goes from the card to the issuing bank in order to verify the card details and create the unique code for the transaction.

Fool The Thief

With the magnetic stripe card, your card information doesn’t change. So, if a hacker steals your card info with a swipe, he can reuse it anywhere else profitably. However, if a hacker steals the chip card information when it was used at one point of sale, that information cannot be reused. This means that the transaction will fail if the information is used once more at the same terminal or at another point-of-sale terminal. This is because of the unique code created for each transaction. So, every single time you use the card, a new code is created that is specific to that transaction. Since the code is dynamic, stealing card information is totally meaningless.

Read This: Virtual Credit Cards

You’ve Got The PIN Too

What happens if the card is stolen? Yes, the RBI has thought about that as well. This is why the RBI recommends that banks issue only PIN-based chip cards. Every chip card will come with its own unique PIN. This is very similar to your ATM PIN. Make three wrong PIN entries for your chip card and the card will get blocked. This way, even if your card is stolen, the thief will not be able to use it as long as they don’t have the PIN number. So make sure that you haven’t written your PIN number at the back of the card or anything like that.

Must Read: ATM Usage And You

It’s Cool

Apart from the chip technology, chip cards can also be read using the latest Near Field Communication (NFC) technology. One just needs to tap it against a terminal to get card data. These are known as contactless transactions. However, only specific chip cards might be NFC compatible as the technology is yet to develop in India.

Even though the RBI has told banks to replace magnetic stripe cards with chip cards, many banks are yet to start the exercise. You can, however, ask your bank to replace your old card or choose a brand new card that suits your needs and lifestyle.

Additional Reading: Why Online Banking Is Your ‘Friend With Benefits’

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