EMV Chips and Credit Card Fraud
You trust your bank, online merchants and major retailers to keep your financial information safe. Unfortunately, that isn’t always possible.
From skimming to hacking, inventive criminals are always finding new ways to steal your credit card and debit card information.
In an effort to protect consumers and reduce losses, Mastercard and Visa teamed up with Europay to bring you the EMV chip: a new technology aimed at thwarting the theft of your credit card information.
EMV Chips vs. Magnetic Stripes: How They Work
An EMV chip is a small microchip located on the front of your credit card. When you made credit card purchases in the past, the vendor swiped your credit card through a card reader.
The card reader picked up and stored the information present within the magnetic stripe on the back of your card.
EMV chips serve the same purpose. Like magnetic stripes, they provide the merchant with the information necessary to process your payment.
Unlike magnetic stripes, EMV chips are uniquely encrypted.
Each transaction produces an encryption code that protects your personal information as it moves from your credit card to the vendor’s computer.
The vendor needs a special type of card reader to process EMV chips.
Do EMV Chips Reduce Credit Card Fraud?
Merchants that accept chipped cards pose a lower risk to their customers than those who only use magnetic stripe readers.
This is because, in addition to being encrypted, EMV cards generate a unique identification number for each transaction.
If they have access to your credit card information, thieves can create a counterfeit credit card–complete with a functional magnetic stripe–and use it to charge purchases to your account.
The encryption and unique transaction numbers EMV chips generate, however, make it nearly impossible for would-be thieves to successfully simulate a chipped credit card.
The degree of difficulty thieves face in duplicating chipped credit cards makes these cards considerably safer than their magnetic counterparts.
Although it’s still possible for dedicated thieves to steal your credit card information–usually by installing software into a merchant’s computer that “reads” EMV chip transactions–it’s a lot less likely.
Why Your Credit and Debit Card Information Is Still at Risk
EMV chips may be new technology to Americans, but Europeans have enjoyed the added protection these chips provide for over a decade.
Because chipped credit cards are the standard overseas, most merchants that accept credit cards are equipped with the special terminals necessary to read EMV chips.
Many European merchants are unable or unwilling to accept credit cards that only have a magnetic stripe.
Because so few credit card transactions in Europe take place using a magnetic stripe to transmit information rather than an encrypted chip, credit card fraud is much less common than in the U.S.
Unfortunately, your chipped credit card can only protect your information if you use the chip to make purchases.
Few merchants in the U.S. have the special payment terminals necessary to pull data from microchips.
This means that most vendors will still access your credit card data using the card’s magnetic stripe–leaving you at greater risk of having your credit or debit card information stolen.
EMV Chips May Lead to a Higher Risk of Online Credit Card Fraud
Criminals who glean a portion of their income from credit card fraud aren’t simply going to give up and search for honest work once chipped credit cards become the norm.
Fraudsters will simply find different ways to access and use stolen credit card data.
Online purchases don’t require a magnetic stripe or an EMV chip. As a result, the internet is the ideal place for thieves to continue their fraudulent credit card activity–and empirical data suggests they’ll do just that.
As European countries switched to the new EMV chip technology, for example, each reported a noticeable increase in online fraud.
The U.K. alone experienced a 79 percent increase in fraudulent internet purchases after EMV chips were introduced.
As magnetic stripes are phased out, your risk of falling victim to credit card fraud will gradually decrease.
Unfortunately, dedicated criminals will find a way around even the most stringent technological safeguards.
EMV chips may provide you with added protection against theft, but they are no substitute for caution.
Regular online monitoring of your credit card accounts and bank accounts ensures that you’ll catch any suspicious activity early. This helps minimize the damage if your information is stolen.
Regardless of whether you use a credit card equipped with an EMV chip or stick to the magnetic stripe variety, vigilance will always be your best weapon against credit card fraud.