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The Truth About "Chip" Cards
Since we started rolling out EMV-chipped cards last year, there have been a lot of questions about why they are required, how they are used, and if they really protect you from fraud. Here, we'll attempt to answer some of your questions, expel some of the myths, and tell the honest truth about what "chip" cards do and don't do.
What is EMV?
EMV stands for Europay/MasterCard/Visa. These three companies have worked together to implement more secure technology in the effort to prevent debit and credit card fraud. EMV actually began in Europe in 1994, and just began adoption in the United States in 2015.
Why was it necessary to change my card to a "chip" card?
The standard magnetic strip cards we are accustomed to in the U.S. are based on a 50-year-old technology. The magnetic strip stores your name, account number, the card expiration date and the security code from the back of the card. If someone stole your card or even just swiped it through a card reader, all of that information could be used for illegal purposes and even full-blown identity theft. The EMV chip adds an extra layer of security to protect your information.
What does the EMV chip do?
Your card's microchip creates a unique one-time-use code for each transaction where the card is used with an EMV-capable card reader. That last part is key. If your card is not being read by a chip reader, that extra layer of protection is useless! When the two work together, however, it makes cards much more difficult to counterfeit, and makes counterfeit cards impossible to use for onsite retail purchases where chipped cards are accepted. Most importantly, it prevents hackers from getting your account information in the event of a store's data breach.
But I'm super careful with my card. Why do I need to have a "chip" card?
Fair question. The problem is, though, that retailers may not be as careful with your personal information! During the Target breach in 2013, in the midst of the Christmas shopping season no less, hackers gained access to the personal information of over 40 million people! If you were one of the victims, the good news is that your credit union protected you from fraudulent charges. The bad news was for us, though, as the credit union was out thousands of dollars in losses from covering those charges. And, of course, it didn't mean you weren't put through the hassle of waiting for your funds to be refunded, and being without a card while a new one was ordered and mailed to you.
The hard, honest truth...
Does having a chipped card completely protect you? Unfortunately, no. As we mentioned above, if the card is not used with an EMV-capable card reader, the transaction itself is not completely secure. For instance, if you use your card to make a purchase online, you are still vulnerable. And anyone that steals your card information could make purchases online, too. There are ways you can further protect yourself when shopping online, though. Read about that HERE. And using your card at retailers that still make you "swipe" is another issue. In Europe, cards don't have the magnetic strip. Their cards only have the microchip. In the not-to-distant future, U.S. cards will be this way, too. For now, though, not knowing when you should swipe and when you should insert your card into the chip reader is a pain, and there's a good chance the clerk behind the counter won't be informed enough to help you. Given that all merchants are supposed to now be EMV-compliant (gas pumps are the only current exception), we highly suggest complaining to a manager when you are asked to swipe your card, and you should even consider not shopping with the merchant until they are fully compliant. After all, they are putting your information at risk! By swiping your card, the merchant is gathering and storing your information on their systems. If they are breached (and chances are, they will be), hackers will gain access to your information. One the other hand, using the chip, the merchant never actually has access to your card number or other card information. When they are breached, your information is nowhere to be found.
Stay on Guard
Regardless of how secure you are, or think you are, you should stay in the habit of checking your account activity weekly to monitor your transactions. As soon as you see something suspicious, report it to us! Rules for chip cards are likely to change as the technology evolves here in the U.S., but in general, you should have confidence when using your EMV chip cards because they provide the most secure transaction when used in combination with your PIN.
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