What is an EMV Chip? A Guide to the Credit and Debit Card Security Feature

When I got my first card with a little embedded metallic rectangle, I thought it looked cool. But it wasn’t for show; my card got a major upgrade in the security department.

An EMV chip, that little rectangle or square, is a computer chip embedded in credit cards and debit cards. The chip sends a secure, one-time code when you put it in a card reader that the retailer uses to process the transaction. 

An EMV chip is a small computer chip embedded into your credit card that makes transactions more secure by generating a unique code to a merchant’s card reader.

Having a credit card with an EMV chip is like having a strong password that protects your credit card. As someone who’s had my credit card information stolen, I welcome any change that makes it harder for scammers to steal it.

EMV chips represent a big shift in credit and debit card security. If you want to know everything about the technology (I promise it’s more interesting than you think), you’ve come to the right place.    

Most consumers now use cards with EMV chips. In fact, it’s hard to find credit and debit cards without them. Here are a few of the most compelling reasons credit card issuers have been pushing that shift.

Enhanced Security Features

The most basic reason to use an EMV chip card is the enhanced security features, especially compared to a card with just a magnetic stripe. When using a card with an EMV chip, the card details remain secret and secure. 

We’ll go over the specifics later, but for now, you should know it is a lot easier to get data off of a magnetic strip. Swipe your card at the wrong place, and a bad actor can easily clone it and use it wherever they want.

If you’ve never had your credit card hacked, you probably don’t realize how annoying it can be to replace the card. If you use your card to automatically pay for utilities, streaming services, or other recurring bills, you’ll have to change that information on all those accounts. Trust me, it’s not something you want to go through.

If you forget to do that, then you may be assessed a late fee or have the service canceled. There is nothing more annoying than having to contact every single bill provider and have to change your payment details (but it is a good way to get out of that gym membership they won’t let you cancel).  

Reduced Liability for Fraud

EMV chips greatly reduce fraud compared to swiping with a magnetic stripe. Not only does this help everyday consumers, but it also helps merchants, who can also be fraud victims. 

If you encounter a fraudulent charge on your credit or debit card, you can call your card company and dispute it. Often these disputed charges are written off in chargebacks. But, ultimately, businesses bear this cost. 

EMV cards reduce chargebacks and save businesses a lot of money. This also helps card issuers not be responsible for as much fraud. I honestly never thought about who has to pay when someone commits fraud. Someone has to eat that cost, after all.

Plus, if you use your debit card and don’t use the EMV chip, then you could actually be on the hook for more fraudulent charges. Debit cards provide fewer protections for consumers who have their card information hacked or stolen.

If you don’t report the fraud within two business days, you could be liable for up to $500 in false charges. This is one reason why you may want to rely on your credit card instead of your debit card, because you’ll be liable for less ($500 maximum if the fraud is reported within 60 days). This is another reason why I never use my debit card unless I’m getting cash.

Improved Transaction Efficiency

One of the only downsides to using an EMV chip card is that you have to insert the card and leave it in the reader for a few seconds.

I know, I know. Swiping a card is faster, and it feels like the card doesn’t even read half the time.

However, you can also tap to pay with an EMV chip card, which carries the same safety features as inserting the card.

In my experience, tap-to-pay is the fastest way to pay.

The upside is that the retailer never has to manually enter the number because the EMV chip should work better at a point-of-sale terminal.

This also means there should be fewer errors or mistakes because the card is doing all the work, not the cashier.

Want to see how EMV chip cards and traditional magnetic stripe cards compare? Here’s how I break it down.

Security Differences

When you swipe your card, the magnetic stripe will transfer the card’s number to the card reader. This is known as static data. On the other hand, an EMV chip code generates a unique, one-time transaction code. This is known as dynamic data because it changes every time. 

Think of it like this: imagine you’re going into one of those 1920s Speakeasies with the little sliding-eye window. You need a password to get inside. If the password never changes, all someone needs to do to get in is listen to someone else say the password. However, if the bouncer asks a question that has a different answer every time, it’s a lot harder to sneak in uninvited. 

The same principle applies to cards: if you use static data, once someone steals it, they just have it. An EMV chip, on the other hand, dynamically generates a token that becomes invalid after it’s used. 

Even if you use your card again five minutes later, it will provide a different code than before. Dynamic data significantly limits opportunities for scammers.

Cards that only have a magnetic stripe are much easier to fake and duplicate. If you can remember what it was like shopping before EMV cards, cashiers would often look at your card carefully to ascertain whether it was fake or not. Cards often had other ways to show they were real, like a unique holographic image.

Because EMV chips are so secure, cashiers don’t have to examine your card when you’re checking out. This could be another reason why it’s actually faster to use an EMV chip card, because no one will question whether you’re the actual cardholder. Again, only people above a certain age will remember what a hassle it used to be to prove your identity while checking out. You kids don’t know how good you have it.

If you swipe a credit card, it can be hacked and skimmed. Skimming is when a separate device is attached to a card reader (think a gas station pump payment terminal) and the device captures your card information. One trick that I’ve heard is to jiggle the card when you insert it, or to tug on the card reader. If something comes loose, that might be a skimmer. 

Also, if you hear about someone whose credit card information was stolen after using a certain gas station, you should try to avoid that particular location.  

Skimming is a huge problem; the FBI says that skimming fraud costs retailers and individuals about $1 billion each year. While EMV chips have cut down on theft, some hackers have found ways to infect the card readers themselves with malware that can also steal information, even with an EMV chip. However, these are much less common (and a lot more complicated) than skimming readers. 

Transaction Process Variations

Before chip cards were created, you had to swipe the magnetic stripe of your credit card onto the card reader. The swiping action transferred your credit card’s details, including its number, to the reader. This made credit cards more susceptible to hacking because all relevant data was transferred.

That’s why EMV chips are so revolutionary — they encrypt the data and only use a one-time code to transfer information. When you tap your card, the process is similar to inserting the chip. Tapping also creates a one-time code that is more secure than swiping.  

There are two types of chip cards: chip-and-pin or chip-and-signature. Chip-and-pin systems are much more popular in Europe and are rarely seen in the U.S. Chip-and-signature cards are used by most U.S.-based retailers.

A chip-and-pin card requires that you input your PIN to complete the transaction. Because no one should have the PIN besides you, it is considered a safe way to manage transactions. Chip-and-pin cards are more likely to be debit cards. 

If you’re traveling abroad and bringing a credit card, it may be a good idea to figure out if there is a PIN attached to your card. If not, you may want to create one just in case a foreign retailer uses a card reader that requires inputting a PIN. This is more common in some countries than others.

Consumer Experience

When it comes to time, swiping your card is usually faster than inserting it and waiting for the reader to process the code. Some consumers may get impatient with the slight delay.

However, if you have a card with an EMV chip, then you can use contactless payments or tap-to-pay. The tap-to-pay option will use the EMV chip to connect with the retailer and is just as safe as inserting the card. However, tapping is faster than inserting the card, so it can feel like less of a hassle for customers.

Just remember, if you can’t tap your card, you should insert the EMV chip in the card reader. Do not swipe it.  Swiping opens you up to possible fraud and hacking. It’s always best to take advantage of the EMV chip. When in doubt, take a page from Dora the Explorer: no swiping. Got it? Good.

The magnetic stripe on your card may be less susceptible to damage than a computer chip. When storing your card, make sure it doesn’t rub up against something that could scratch it. If you get your wallet wet, make sure to dry off the cards as soon as possible. Standing water could affect the chip as well. This is the main reason why you can run into read errors with your EMV chip, and they can be a massive pain.

If your chip card stops working, you can simply contact the card issuer and ask for a replacement card. Try to do this before it becomes an issue so you’re not forced to swipe the card. But don’t worry — I’ve never had to pay a fee to get a card replaced, even if it was my fault for damaging it. 

Nowadays, we take EMV chips for granted and don’t realize how important they are for maintaining our credit and debit card privacy. Before writing this article, I had no idea where EMV chips came from, or how they became so widespread. 

The Origins of EMV Technology

EMV stands for Europay, Mastercard, and Visa. In 1993, this trio of payment companies collaborated to work on and create the EMV chip. Nowadays, American Express, JCB, and UnionPay are also part of the network that monitors this technology, but EMVAJU is a mouthful, so we just stick with EMV. 

EMV chips were first introduced into credit cards in the United States in 2011, but didn’t start becoming widely used until around 2015. Before that, magnetic stripes were the most common way to pay with a physical card. Remember swiping your card everywhere? 

Magnetic stripes, however, were prone to fraud — including skimming. Scammers could tap into these weaknesses, and consumers paid the price. In an attempt to combat the fraud, EMV chip cards were introduced in Europe, first in France and then across the continent. 

If you traveled abroad during the 1990s and 2000s, you may have noticed that you were asked to insert your chip into a card reader instead of swiping. In fact, Europe always seems to be on the cutting edge when it comes to card security. 

When I was studying abroad in London in 2009, I remember signing my receipt at a grocery store. The cashier then compared the signature on the receipt to the signature on the back of my credit card. I had never seen that before. 

When the signature didn’t match up, the cashier questioned me thoroughly. That’s when I learned to sign my name the same way every time.

How EMV Chips Add Security

EMV chip cards generate a unique transaction code each time the card is inserted into a machine. This code cannot be reused for additional transactions. The code doesn’t reveal information about your card, like the card number, CVV, or expiration date. 

Think of it like when you log onto your bank or credit card online and you receive a text verifying your identity. The code that you input confirms that you’re the person initiating the transaction.

Research from 2021 found that about two-thirds of all issued cards have EMV chips — nearly 11 billion cards in total. In 2022, more than 90% of card-present transactions used an EMV chip (card-present refers to in-person transactions instead of purchases made online).

Most popular banks and credit card issuers issue cards with EMV chips. If you used to have a card without an EMV chip, you should be able to request a new card with an EMV chip. Having gone through my wallet recently, I don’t have any cards without EMV chips.

Using an EMV Chip Card in a Transaction

Using a card with an EMV chip is fairly straightforward, even if you’re still used to swiping. First, wait for the card reader to ask you to insert your card. Insert the card with the EMV chip pointing toward the card reader. Wait until the card reader asks you to remove the card; this may take a few seconds.

You may be asked to provide a PIN. This is especially common if you’re abroad, since many countries require a PIN as an additional level of security.

You may also be asked to sign the receipt. The merchant can then compare the signature on the receipt to the one on the card. If the signatures don’t match, they may decline the transaction. However, most stores — at least in the United States —  do not use signature match technology. 

EMV chips are now the gold standard when it comes to cardholder security. Because customers can now simply tap their cards, cards with EMV chips are just as fast as other cards. 

While the EMV chip is now the gold standard when it comes to card security, there are new types of security features coming out, like biometric identification. In the future, you might provide a fingerprint or facial scan to use your credit card. Amazing, right? However, in the meantime, I’ll keep enjoying using my EMV chip-enabled card.

One interesting wrinkle since EMV chip cards became commonplace is that the most common type of fraud happens during online transactions, where you can’t rely on the EMV chip to protect you.