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Chipping at the Safety of Your Holiday Shopping Spree

chip-cards

Chip Over Strip

There is no time of the year where we feel as generous as we do during the festive season. The latest standard in credit card security – the chip card – is said to provide you with improved protection against credit card fraud. So what was wrong with the magnetic strips that sparked the development of the chip? How does the chip work? And what makes it safer than a magnetic strip on your old credit card?

Why The Movement Away from Magnetic?
The magnetic strip on your old debit or credit card contains unchanging (and unchangeable) data. This means that whoever gains access to the data, can theoretically gain access to the card and the cardholder’s information. This makes it an easy target for fraudsters as they are able to replicate the cardholder information and card data over and over again – for example, like in a restaurant as additional purchases, and even to create new credit or debit cards.

How do Chip Cards Work?
Also called EMV cards (Europay, MasterCard and Visa), these cards contain computer chips that authenticate every transaction. This microprocessor contains the account information and account holder information. When dipped into card facilities, tapped against payment terminals or waved near one, your card becomes connected for a potential transaction. The data on your card is only accessible with authentication codes, unique to each transaction, limiting the number of transaction processed at a time and at each establishment. EMV or chip cards also require PIN codes to authorize purchases.

Why Are Chip Cards Safer?
With the cloning of cards, the reader or pin-pad machine is the center of operations. Magnetic strips simply contain the account information; the reader and the bank then communicate and the reader is challenged to enter the correct PIN to access the information for the transfer. The reader then has the opportunity to skim or copy the contents of the magnetic strip and PIN when you enter the pin into the machine. The card, account and cardholder information could now have been copied for use by the fraudster. Magnetic strip skimmers can be bought for as little as $20.

When you use a chip card, the reader is just a medium for communication – the bank talks directly to the chip. This means that the chip is now accountable for the challenge. The unique transactional code and PIN are then required to conduct the transaction. This can be seen as a secret cypher between the bank and chip – the reader can try to spy on the transaction but it will not have access to enough information to be able to impersonate the chip for future fraudulent transactions.

The unique transaction code is also part of the only replicable information during the transaction. As this is a one-time use code, replicating the information has no purpose as no future transactions can be authorized with that code. Not only is the code ever-changing, the ability to isolate and extract that level of data from a microprocessor requires vastly more expensive equipment than an every-day fraudster has access to.

Chose the safer card option; switch to EMV cards and have a stress-free, fraud-free shopping experience this festive season.