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Here are the reasons you need to get a chip card!

If you pay with cards regularly, you would have noticed that the cashier now asks you to insert your card instead of swiping. Your card could even carry out a contactless payment, which means you only have to bring the card close to a card reader for the transaction to go through.

You can do the above because you own a chip card. What is a chip card, how does it work, and why do you need one?

Read the rest of this article to find out.

What is a chip card?

A chip card is a credit card that contains a microchip, in addition to a traditional magnetic stripe. The embedded chip is used to encrypt information. Chip cards can be used to pay at stores, terminals, or used for cash withdrawals on ATMs.

Other names for chip cards are smart cards, chip-and-PIN cards, Europay-Mastercard-Visa (EMV) cards, and chip-and-signature cards.

Now that you know what a chip card is, we will look at how it works.

How does a chip card work?

Credit and debit cards have been with us for decades, making payments cashless and convenient. However, for most of the history of these cards, information about the owner was stored in a magnetic stripe on the back.

Chips were introduced into debit and credit cards in 1986 by the trio of Europay, Mastercard, and Visa, which informs the EMV appellation. These newer cards contain a silver or gold microchip on the front, which stores information just like the magnetic stripes on the back. They were first used in Europe but have now become standard globally.

To use a chip card, you will insert the card into a terminal that can read chips. This terminal could be a POS or an ATM, which will send the card owner’s information to the merchant or card provider’s backend.

The transaction gets approved if the card owner’s account balance can cover the amount they want to pay. If the opposite is the case, the transaction is rejected. Most terminals require the owner to input a PIN or a signature.

If the retailer does not have a chip-enabled terminal, the card owner will fall back on the magnetic stripe by swiping, accompanied by the PIN or signature.

What type of chip card can you get?

There are two types of chip cards that financial institutions can offer you. Your chip card could be chip-and-signature, which means it is the chip that sends information from the terminal to the card issuer. This type of chip card requires a PIN for the transaction to go through and is more secure than the traditional magnetic stripe.

The second type of chip card is chip-and-PIN, which requires a PIN to complete transactions. It is very common and offers the most security.

We will now look at why you need a chip card.

Why do you need a chip card?

Chip cards provide an extra security layer with chip-enabled terminals. This is because the cards are more difficult to skim due to the encryption of data. The result is that the fraud prevention solution provided by the card issuer is enhanced.

Embedded chips help merchants avoid card-present fraud. According to Visa, they helped reduce this kind of fraud by a massive 76 percent between 2015 and 2018.

When you lose your chip card, you will have to apply for a replacement as the chip cannot function as a tracking element because they are limited to verifying card data. However, all transactions from the card can be traced to where they originate. Banks can monitor these transactions and alert the card owner if they appear suspicious.

To further protect yourself from credit card frauds, insist on inserting the card yourself, and do not hand it over to anybody. Avoid swiping as much as possible as it increases the possibility of skimming. If you suspect your card has been compromised, freeze your account immediately and request a new card.

Written by HackerVibes

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