The Real Deal with Credit Card Chips

Have you ever gone to check out at a store and swiped your credit card, just to be told that you need to use the chip reader? And then you hold up the line for ten minutes because you can't figure out how long to leave it in for or what to press? What is the point of this new chip technology, and how does it work?

Chip technology has been around for about 30 years, although the United States has recently broadly adopted the technology in the last five years. In 2013, hackers stole credit and debit card information from 40 million Target customers, and there were also massive data breaches elsewhere in the retail industry. These hackers, who were never caught, were believed to have installed malware onto the checkout card readers that stole data each time a customer swiped his or her card. This was the incentive for companies to start adopting the more secure microchips instead of the magnetic strips on credit cards that are easy to hack.

Microchips are commonly referred to as EMV smart chips, which stands for Europay, MasterCard and Visa: the companies that created this technology. The difference between microchips and magnetic strips is that instead of embedding credit card numbers and user information into the strip, it is contained in the little chip in the card. In addition to storing data, the computer chip can process data. When a user inserts the chip into the card reader, the chip and the reader essentially have an encrypted conversation to authenticate the card. The chip uses cryptography to protect the data. When using a magnetic strip, the swipe of the card simply outputs the card number and expiration date to the reader, making these cards easy to counterfeit.

In the US, the most common type of chip cards currently are the "chip and signature" cards, which require a signature to authorize the charge. In contrast, many European countries use "chip and PIN" cards, which require a four-digit PIN to authorize the charge. The "chip and PIN" cards are more secure because a signature can be easily forged.

References:

Content:
https://en.wikipedia.org/wiki/EMV
http://money.howstuffworks.com/personal-finance/debt-management/chip-and-pin-credit-cards3.htm
http://blog.credit.com/2014/10/how-does-chip-pin-actually-work-97454/


Images:
https://static01.nyt.com/images/2016/08/04/business/04cardchip4/04cardchip4-master768.jpg
https://assets.nerdwallet.com/blog/wp-content/uploads/2014/01/best-emv-chip-credit-cards.jpg