Using Smart Credit and Debit Cards: Chip and Dip

EMV Chips
Someday these chips will replace magnetic stripes. Nicholas Rigg/Photographer's Choice RF/Getty Images

If it hasn’t happened already, you’ll soon get a replacement credit or debit card with a new feature: a metallic smart chip embedded in the card. Those chips will ideally go a long way towards reducing card fraud and (someday maybe) lowering costs for everybody.

What’s with the Chip?

If you have a chip, you can now dip. That is, you now have the ability to use the chip, but you might find yourself swiping for a few more months (or years) while retailers upgrade payment terminals.

Instead of swiping your card through a device that reads the magnetic stripe, you’ll be able to insert (or “dip”) the card into chip-enabled readers. You'll know it's available if card readers show a message like "your card must be inserted."

To make a purchase in-person, insert the card chip-first with the chip facing up. Follow the onscreen prompts to complete your transaction, and then remove the card. The process is slower than the quick swipes you’ve grown accustomed to because the chip and terminal exchange information.

In the United States, you’ll probably still sign for purchase (known as chip-and-signature), at least for the next few years. Overseas, there’s a better chance that you’ll be asked for a PIN (known as chip-and-PIN) to verify your identity, although you might be able to hit "Cancel" (or similar) to bypass PIN verification if needed.

Both overseas and within the US, you can still make occasional low-dollar purchases without the need for a signature or PIN.

With some cards, you’ll also be able to make contactless payments by tapping your card or holding it over the card reader (instead of inserting the card into a terminal).

Phone and internet purchases will work the same way they did with your old cards: provide your card number, security code, and any other details required.

Smart chips are also known as EMV cards, based on a standard developed by Europay, MasterCard, and Visa. That standard, while not impossible to crack, has been used with success worldwide for more than a decade.

Why Smart Cards are Better

An EMV chip is actually a tiny processor with memory. That additional horsepower makes it harder to steal your information and print fake cards. Each time you use the card for a purchase, a one-time-use code is generated as part of the transaction. If somebody steals that code, it won’t work again. Contrast that process with magnetic stripe cards, which always use the same information: your card number.

Another feature of chip cards is the ability to change information on the chip. If your card issuer wants to set rules for how and where the card is used, it’s just a matter of updating the chip (for example, your card might be set to prevent or allow overseas purchases, or to require verification after a certain number of transactions). Chips are encrypted and can hold a lot more information than traditional magnetic stripe cards, so they’re dramatically more customizable. Chips don’t just store and provide data like magnetic stripes – they interact with chip-enabled terminals.


The transition to dipping will be gradual. Initially, you’ll be able to use new cards just as you used your old cards – swiping the magnetic stripe – and you’ll also have the ability to use the chip whenever newer payment terminals are available. Many merchants still need to purchase card readers that can handle chips, and they (along with consumers) need to learn how to use them. Some merchants already have capable card readers in place, and a few are already using them, but for others it’s just a matter of activating EMV payments with software.

Most card issuers in the United States have chosen to go with chip-and-signature instead of chip-and-PIN verification. A signature is less secure than a PIN, but issuers seem to be focused on eliminating fraud due to stolen card numbers (as opposed to situations where a card is physically taken – or faked – and used fraudulently, which is a smaller problem).

Card issuers also seem concerned about overwhelming customers with a new process, so they’re reluctant to be the first company that makes you switch to chip-and-PIN.

In the coming years, chip-and-PIN will probably become more common. If you specifically want chip-and-PIN, see this list for a card that might meet your needs. Cards that default to chip-and-PIN are more secure, and you’ll have an easier time using them for foreign travel.

After October of 2015, dipping will become much more common; merchants will have more incentive to install and enable smart readers. After that date, in many cases the liability for fraud shifts to whoever who did not use EMV technology.

Example: a card is used fraudulently in-person at a retailer. If the card issuer did not provide a chip-enabled smart card to the customer whose card was used, and the merchant had a smart payment terminal, the card issuer will pay for the fraud. If, on the other hand, the merchant failed to install an EMV reader (and require customers with smart cards to use it), the merchant is responsible for the loss.

Pay-at-the-pump terminals at gas stations have until 2017 to get caught up due to the increased complexities of upgrading those machines.

For consumers, liability is unchanged. Most card issuers offer voluntary “zero-liability” coverage, and federal law protects credit card users from fraud and allows chargebacks when there are disputes. Debit card users are also protected from fraud, but you need to notify your bank of any problems more quickly for the best protection.