What You Need to Know About Using a Chip Credit Card

chip credit card

The chip credit card has been around in Europe since the 1980s, but chips on credit cards just made their debut in the U.S. over the last few years.

In October 2015, chips on credit cards became mainstream in the U.S. Eventually, every credit card will become a chip credit card because chip and PIN credit cards offer huge security benefits.

Find out how chip cards work — and why this change is so important for your security.

How does a chip credit card work?

Magnetic strip credit cards contain information that can be easily stolen using a device called a skimmer. Replicating a credit card with a skimmer is as easy as getting a new room key at a hotel. Just swipe the original and then swipe a blank card and it becomes a copy of the original.

Chip credit cards use information located in that little chip on the face of your card. When you insert your card into a chip terminal, encrypted information only usable by the terminal and the processor is transmitted. The information is encrypted using three cipher algorithms known as 3DES, or triple data encryption.

If a hacker tries to steal your card information while in transit from a chip credit card, they will only get jumbled data that isn’t useful for fraud. Because of this, chip credit cards are much more secure than the old magnetic ones you’re used to.

Pros and cons of chip credit cards

With any major change in the world of payments, there are going to be advantages and disadvantages. Here are the pros and cons of chip credit cards:

Pros:

  • Better security through encrypted data transmission
  • Makes transactions much more difficult for data thieves to hack

Cons:

  • Slower processing speed at checkout compared to magnetic cards
  • No added security for online transactions

Chip and PIN credit cards vs. chip and signature cards

For the most part, U.S.-based chip cards use a “chip and signature” authentication, requiring you to sign your name for transactions. Although this is more secure than the magnetic strip cards, anyone can forge a signature. So, in other parts of the world, the “chip and PIN” method is used for added security.

Chip and pin credit cards work like your debit card. You enter your four-digit PIN to further secure your transaction. If the PIN doesn’t match the PIN encoded in the credit card chip, the transaction is declined.

Even though chip cards are the safest credit cards, there are more secure payment options. Paying using Apple Pay, Android Pay, and Samsung Pay is even more secure since your actual credit card number is never used.

Why chips on credit cards are important

Even with a higher production cost and slower checkout speeds, chip credit cards are still a step in the right direction.

Last year, credit card fraud in the U.S. cost $16 billion. While a portion of that cost is absorbed by banks and retailers, consumers ultimately pay the price in higher costs at the store and the bank. If chip credit cards can cut just a fraction of that $16 billion, the overall payoff is massive.

The credit card data breaches at Target, Home Depot, and other major retailers are good reminders that our payments need to be more secure. Using encrypted data rather than your credit card information can help prevent major losses for companies and hassles for consumers.

After the Target breach, I received a new credit card with a new number. This meant I had to update many automatic bill payments. Sure, I didn’t have to pay for any credit card fraud out of pocket, but it was still an inconvenience to get a new card number.

Chip credit cards are here to stay

Chip and signature and chip and PIN credit cards aren’t going anywhere for a while. Using a chip at checkout is becoming the norm. Because upgrading to a chip terminal can cost hundreds of dollars per terminal, it has taken retailers some time to make the move.

But rest assured, eventually you’ll use a chip everywhere you go. And this is great news that will help keep your information safe and secure every time you shop.

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LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Finance Lender Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
  2. Personal Loans: Fixed rates from 5.49% APR to 14.24% APR (with AutoPay). Variable rates from 5.29% APR to 11.44% APR (with AutoPay). SoFi rate ranges are current as of December 1, 2017 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.29% APR assumes current 1-month LIBOR rate of 1.34% plus 4.20% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2017, the one-month LIBOR rate is 1.23%. Variable interest rates range from 6.02% – 15.97% (6.02% – 15.97% APR) and will fluctuate over the term of your loan with changes in the LIBOR rate, and will vary based on applicable terms and presence of a co-applicant. Fixed interest rates range from 5.99% – 16.24% (5.99% – 16.24% APR) based on applicable terms and presence of a co-applicant. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with Citizens Bank at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, Citizens Bank checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Benefit: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.39% - 29.99%$1,000 - $50,000Visit Upstart
5.29% - 14.24%1$5,000 - $100,000Visit SoFi
8.00% - 25.00%$5,000 - $35,000Visit Payoff
5.99% - 16.24%2$5,000 - $50,000Visit Citizens
5.99% - 35.89%$1,000 - $40,000Visit LendingClub
5.25% - 14.24%$2,000 - $50,000Visit Earnest
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