EMV chip 101

98% of credit cards expected to have the chip by the end of 2017


Kelsey McLean was on her honeymoon- when the bad news came in: she was the victim of credit card fraud.

"I was horrified, I was absolutely horrified," she said.

McLean spent months cleaning up her credit.  So when her mail recently arrived with this replacement credit card, containing a little microchip, she was excited to learn more about this new fraud fighting measure.

"I think it's a good step in the right direction," she said.

And a new microchip card may be showing up in your mailbox soon. They're called "EMV" cards, which stands for Eeuropay, Mastercard and Visa. EMV is the global standard for chip card technology, and all U.S. debit and credit cards will eventually be replaced.

"This is the most significant upgrade to the payments infrastructure in our country in the 40 year history of the credit card," explained Jason Oxman with the
Electronic Transactions Association.

Here's how they work: The 8 million merchants in the United States that let you pay with plastic will be installing new chip card readers. And when you get your


new card, instead of swiping that old magnetic strip, you'll "dip the chip" side of the card into the machine for a few seconds, allowing the chip to communicate with the card reader. 

"The new chip cards generate a unique or dynamic security code with each transaction," said Oxman. "What that means is every time you use your card that chip that's embedded in the card is going to generate a new security code that will not be repeated again when you use that card the next time."

So why the change? With magnetic strip cards, the security code is the same for each transaction. That makes it easier for criminals to make counterfeit cards, which is the top cause of in-store fraud. But the microchip card codes are always changing and proponents say that's tougher to replicate.

"My top message for consumers with these credit cards is, be excited," said Sean McQuay with NerdWallet.

While you can be excited, experts warn you to also be mindful. These new cards won't stop   someone from stealing your chip card and using it in a store. And, it won't stop someone from using stolen credit card numbers to make online purchases.  

In fact, a NerdWallet study predicts online fraud will likely increase once these chip cards are rolled out. They say that trend happened in the UK when it adopted the technology.

"Fraudsters want to be able to steal people's money and so they're going to recognize 'now I can't make copies of people's credit cards I'm going to start doing other things I'm going to try to steal their credit cards and I'm going to figure how to hack more online,' both of which they can continues to use to exploit the system," warned McQuay.

McLean says using her chip card does take longer to process the transaction but... as a victim of fraud, she's fine with that.

"It's a bit of a hassle, but a few seconds and well worth it," she added. 

Master Card estimates 63 percent of all U.S. credit cards will have embedded chips by the end of 2015. And, 98 percent will have the chips by the end of 2017. But, don't worry if you don't get your new card right away. You can still use your magnetic stripe card to pay. The new card readers offer both options.  

Experts say you should always be vigilant to check your credit card statements and transactions to make sure you don't have any unauthorized charges.