What Is Chip And Pin Credit Card Technology?

What Is Chip And Pin Credit Card Technology?

June 23, 2014         Written By John H. Oldshue

The credit card breaches at major retailers such as Target, Michaels and Neiman Marcus have rocked consumer confidence regarding their financial information. That is why credit card companies are rapidly investing in new technology to make their products more secure. Credit card issuers are now incorporating chip and pin technology into their products, which will enhance the security when a purchase is made. Chip and pin credit cards might sound strange, but the technology is actually similar to what has long been utilized in debit cards. Chip and pin credit cards carry a chip that contains the information that would have otherwise been contained in the card’s magnetic strip. Some chip and pin credit cards have both the magnetic strip and the chip. The chip contains a PIN number, which you must enter in order to finalize the purchase.

Why Consumers And Businesses Are Shifting Toward Them

Credit card companies are finding that customers and businesses highly value their security. That’s why they are moving toward technologies that do a better job of protecting the information of cardholders. Chip and pin cards do just that, and industry experts agree that the cards are more secure than traditional credit cards that come only with the magnetic strip. The chip and pin card system is widely used in Canada and the European Union, and it is expected to become common in the United States by October 2015. Chips embedded in chip and pin credit cards are considered much more difficult to clone or capture by a foreign device used by identity thieves.

How The Cards Impact Those Traveling Abroad

Individuals from the United States traveling abroad will likely find the chip and pin system easier to use. Currently, cards in the US are primarily magnetic strip credit cards. It can be difficult to find vendors in Europe that take these credit cards, as most charges are processed using chip and pin systems. The change to chip and pin credit cards in the US will make it easier for US travelers to go abroad without any issues. The change will definitely have a positive impact on travelers, but it is not yet known how long it will take for the technology to become widespread.

Why The Technology Has Yet To Become Widespread In The US

That begs the question—why hasn’t chip and pin technology become popular in the US? It is already in place with debit cards—so what’s taking so long? The answer is that for financial services, it can take a significant period of time to transition into offering new products, especially if these products are an upgrade over the last ones offered. There are relatively high entry costs associated with issuing a large number of chip and pin cards, for those issuing the cards and for vendors. Vendors have to make sure that their systems can handle chip and pin credit cards, which is no small task for many. While Europe and Canada were ahead of the curve with chip and pin technology, it will likely still take a significant period of time before the technology is considered the norm in the United States.

Why Are Chip And Pin Credit Cards Marketed To The Elite?

While you can certainly ask your credit card company or your bank if they issue chip and pin credit cards, what you’ll likely find is that financial institutions are marketing these products to the higher end consumer. That’s because banks and credit card companies believe the elite are more likely to be traveling abroad, where they’ll be using the chip and pin technology. If you are interested in traveling in Europe or Canada, or if you are simply interested in making your card transactions more secure, contact your financial institution about a chip and pin credit card. These cards offer the security afforded to debit cards, along with the federal consumer liability protections typically associated with credit cards.

How Chip And Pin Credit Cards Differ From RFID Credit Cards

Chip and pin credit cards differ significantly from RFID credit cards, which were another type of credit card initially designed for increased safety. RFID, or radio-frequency identification credit cards, do not have information stored on the card itself. Instead, the card has a chip and a radio antenna, which is used to transmit account information. While these cards were innovative when they were created, many feel they have become outdated. In some instances, these cards can be manipulated, with credit card data about financial information and purchases sent directly to identity thieves instead of merchants. Chip and pin cards only work when inserted into the physical reader of a merchant. They are considered more secure than RFID cards. There are also other forms of chip and pin credit cards, such as those that also require the consumer to sign a receipt in addition to entering their PIN number. These cards are sometimes called chip and signature credit cards.

When Are More Chip And Pin Cards Coming To The US?

Credit card companies, banks and merchants in the United States all have relatively high entry costs into the world of chip and pin technology. The good news is that financial institutions are embracing the technology as safe for credit cards. Visa and MasterCard have officially set a deadline for retailers to adopt to chip and PIN credit card technology. By October 2015, all stores will be expected to accept these kinds of cards if they want to accept Visa or MasterCard payments.

If you travel a lot or if you are interested in remaining safe while you make your purchases, you should definitely inquire about the possibility of getting a chip and pin card now.

The information contained within this article was accurate as of June 23, 2014. For up-to-date information on any of the terms, cards or offers mentioned above, visit the issuer's website. Many of the offers on this article are from our affiliate partners, and LowCards.com may be compensated if you take action with any of our affiliate partners.


About John H. Oldshue

John Oldshue is the creator of LowCards.com. He worked for over 15 years in television and won an Emmy award for his reporting. He covers credit card rate issues for LowCards.com.
View all posts by John H. Oldshue