What Is a Chip Card?

EMV Cards Explained

A woman wearing an apron standing near an espresso machine inserts a chip card into a handheld chip-card reader.
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A chip card is a payment card that’s equipped with a secure computer chip that is all-but-impossible for thieves to copy. 

You’ll know your card is a chip card when you see a small metallic square or rectangle on the side: That’s the computer chip that makes your payments more secure. 

Definition and Examples of a Chip Card

When you use a chip card to make a payment, the smart chip electronically transmits an encrypted, single-use code to a merchant’s card reader, allowing the merchant to securely process your payment.

Chip cards can be found all over the world. But they weren’t very common in the United States until 2015 after the world’s largest card networks began pressuring U.S. retailers to replace their payment terminals with readers that accepted chips. 

Previously, most American retailers only accepted magnetic stripe payments.

Shortly after the card networks set a hard deadline for U.S. merchants to shift to chip-card readers (or else be held liable for in-person payment card fraud), U.S. banks and lenders began replacing cards that just had magnetic stripes with higher tech chip cards.

Today, virtually all new credit cards and debit cards in the United States are chip cards. 

The thin black stripes on the backs of most payment cards can also be used to transmit payment details to a card reader. But these magnetic stripe payments are more vulnerable than chip-card payments to fraud. It’s not only easier for thieves to copy information from a magnetic stripe. The data that’s transmitted is the same with every purchase. So thieves can use it to create fake cards.

Alternate Definition: In some cases, a chip card may also refer to a contactless debit or credit card. Many chip cards can be used to make a payment without coming into direct contact with a card reader—the chip will wirelessly transmit its information to the reader. However, not all chip cards are contactless. You’ll know if your chip card is equipped with contactless technology if it has a contactless symbol. 

Alternate Name: Chip cards are also sometimes referred to as EMV cards, standing for Europay, MasterCard, and Visa, or smart cards. Alternatively, if you authenticate your chip with a signature when you check out, your card may be called a chip-and-signature card. If your card is equipped with a PIN that you punch in at the register, then it’s called a chip-and-PIN card. 

Acronym: EMV

How Chip Cards Work

Chip cards use encryption technology and single-use tokens to make chip-card payments nearly impossible to crack. 

When you make a chip-card payment, you’ll insert (or “dip”) the chip into a card reader and wait for the reader to process the chip before you take it back. If a retailer requires additional authentication, you’ll then be asked to sign your name to the receipt. Or if you’re using a chip-and-PIN card, you’ll punch a secret code into the card reader. 

If you’re making a contactless payment, you’ll simply hold your card over the contactless symbol until the payment reader beeps. 

Once you’ve tapped or inserted your chip card, the card’s computer chip will then generate a unique code that the merchant can use to process your transaction.

The information passed from your card to the merchant will be encrypted. But even if a thief manages to break through the encryption, your payment details will still be protected. That’s because chip-card codes are designed to be used just once. So if a thief copies a stolen code onto a fake card, they'll be turned away when they try to use it.

Do I Need a Chip Card?

You will almost certainly need a chip card at some point if you plan to continue to make card payments domestically or travel internationally. 

If you happen to have an older magnetic stripe card that hasn't expired yet, you should still be able to use it. But if a retailer decides not to accept older cards without chip-card technology, you’re out of luck. 

You may also run into trouble if you travel abroad to countries that rely on chip-card payments and you don't want to use cash. 

If your card doesn't have a chip now, it almost certainly will when you replace it. Nowadays, U.S. card issuers only issue cards with chips. 

Alternatives to Chip Cards

Some cardholders complain that chip-card payments are slower to process, particularly when you have to insert your card into a reader and wait for it to beep. Chip-card technology has come a long way since it was first introduced to the United States. So it's not as slow as it once was to process. 

But if you’re in a rush, you can potentially save time by using your phone or other wearable, such as a smart watch, to make contactless payments. Contactless payments only work, however, if a merchant’s payment reader is equipped with near field communication (NFC) technology.  

Alternatively, you may be able to simply pay the old-fashioned way and use cash if a merchant accepts it.

EMV vs Magnetic Stripes

EMV chips are widely considered to be the gold standard for secure, in-person payments. But the magnetic stripe technology it replaced has a much worse security record. 

Before chip-card payments were introduced in the United States, card-present fraud that occurred in stores was much more common.  Security experts say that magnetic stripe payments are also more vulnerable to theft because they transmit the same information for every transaction.  

EMV Magnetic Stripes
Data is encrypted and tough to crack. Data can be lifted more easily using a skimming device.
Information sent to retailers is minimal. So there's not much for thieves to steal.   There's enough information embedded into a card's magnetic stripe for a thief to copy it and use it to create a brand-new card. 
The data sent to retailers is dynamic: Chips generate a different code for every transaction. A stolen code can't be reused.  Data is static. Once stolen, it can be reused over and over again. 
Technology is used widely around the world.  Magnetic stripe cards are becoming rare.  

Benefits of Chip Cards

EMV chips are widely used around the world, making it easy for travelers to use the same card across multiple countries. Even if your card isn’t a chip-and-PIN card, you should still be able to pay for most purchases overseas with your chip card. Many foreign card readers will simply ask you to sign your name instead. 

In addition, chip-card payments are more secure than magnetic stripe payments. So you don’t have to worry about your card details being stolen and used to make a bogus card. 

How To Get a Chip Card

It’s easy. Just apply for any credit or debit card from a U.S. bank or credit union and you can rest assured that the card you get will almost certainly be a chip card. 

Key Takeaways

Key Takeaways

  • Chip cards use an embedded smart chip to securely transmit a cardholder’s information to a merchant. 
  • Chip-card payments are safer and less vulnerable to fraud than magnetic stripe card payments. 
  • Chip cards rely on single-use tokens that make the cards all-but-impossible to copy. 
  • Chip cards are widely used around the world. 
  • Many chip cards can also be used to make contactless payments,