Chip-Enabled Credit and Debit Cards

BankFive provides a higher level of security for each card-based transaction.

Chip technology, long popular in Europe, is becoming commonplace in the United States, too. Your BankFive credit and debit cards now feature this technology, which adds another layer of encryption to protect your sensitive date and thwart fraud. Many retailers are switching their card-reader terminals to accommodate chip technology, which requires you to insert your card into the terminal rather than swipe it. However, if a retailer doesn't support the chip technology, you can still swipe your card to complete your transaction.

What Are Chip-Enabled Cards?

Chip-enabled cards are embedded with computer chips and tethered to technology that’s used to authenticate chip-card transactions.

Cards equipped with computer chips are intended to replace cards with magnetic stripes on the back of them. Cards with magnetic stripes contain data that doesn’t change from one transaction to another. That makes these cards easy targets for crooks, who use stolen card data to create counterfeit cards.

But each time a chip card is used for payment in a chip reader, the card’s chip creates a unique transaction code that cannot be used again, so if a thief creates a fake card based on stolen transaction information, the card will be denied because the information will be outdated.

Experts point out that this technology will not totally prevent fraud from occurring, but it will make it harder for criminals to benefit from stolen card information.

Why Change Cards?

The new cards use chip technology, intended to thwart counterfeit card fraud and security breaches. This technology has been in use in Europe for several years and is now being deployed in the United States.

How Do Chip Cards Work?

Just like magnetic stripe cards, chip cards are processed for payment in two steps: card reading and transaction verification. But there is a distinct difference in how the cards are read. Rather than swipe in a particular direction like you do with a magnetic stripe card, the chip card calls for "card dipping," which means inserting the card into a terminal slot and waiting for it to process information.

Once the card is dipped, information flows between the card chip and the issuing financial institution to verify the card's legitimacy and create unique transaction data. This process will take a bit longer than a magnetic-stripe swipe, so the user will need to take a little more time to dip the card and allow the data to be transmitted. You'll then have to sign for the transaction or enter a personal identification number (PIN) for verification that the card belongs to you.