Home > Credit Cards > 5 Chip Credit Card Myths Busted

Comments 3 Comments
Advertiser Disclosure


Are you a little confused about how the new chip credit cards work? In October, more stores began using credit card terminals that read smart-chip-enabled cards as part of a fraud liability shift, which strongly encouraged the use of this technology. And while the technology appears to be working somewhat smoothly at stores, many credit card users are still unsure as to what these smart chips do, and what they don’t.

So to help clear up some of the confusion, here are facts and myths about using this new system.

Myth #1: The chip credit cards are a new technology.

Although these credit cards are finally being implemented in the U.S., the use of microchips in credit cards dates back to at least to the mid-1980s, and the current standard called EMV was created more than 20 years ago. EMV stands for Europay, MasterCard and Visa, and this system has been in use in Europe for decades. In fact, you can even spot a chip credit card in the 1995 movie “French Kiss,” starring Meg Ryan and Kevin Kline, when his character attempts to use a stolen card that has a microchip in it.

Myth #2: Chip credit cards will prevent all fraudulent transactions.

The microchip technology being deployed in the U.S. is designed to combat only a specific type of fraud called cloning, where a phony credit card is created using the data stolen from a card’s magnetic stripe, or hacked in some other way. Unfortunately, there are many other pathways for criminals to commit credit card fraud. Remember how Kevin Kline’s character in “French Kiss” attempted to use a stolen credit card? In the movie, he gets away with it because the card hasn’t been reported stolen yet. And in real life, there is still little to stop a thief from using someone else’s credit card before it’s reported missing. For example, there are many other forms of credit card fraud that involve “card not present” transactions that take place over the phone or online, where it doesn’t matter if a card has a smart chip. (If fraud occurs, your best bet for catching it early is monitoring your accounts. It’s also smart to check your free annual credit reports and to monitor your credit scores, because an unexplained change could suggest fraud. You can check two of your credit scores for free every month on Credit.com.)

Myth #3: If you have a chip in your credit card, you need a special wallet to protect it.

In the credit card industry, a chip card is referred to as a contact payment system, which means that it must be inserted in the card reader to transmit its information. So a thief can’t steal information from your credit card’s smart chip without actually touching it. And unlike your card’s magnetic stripe, the information on an EMV chip is encrypted. The myth that someone next to you could hack your chip card without touching it was likely a result of confusion with other emerging payment technologies such as Near Field Communications (NFC) and Radio Field Identification (RFID). Both of these technologies use wireless protocols that could conceivably be breached in some circumstances.

Myth #4: Americans can now use their chip cards abroad without problems.

Long before the credit card industry began deploying chip credit and debit cards in the U.S., some Americans clamored for this technology in order to ensure compatibility with chip-reading terminals used in Europe and other parts of the world. So while having chip-enabled cards will help on your next overseas trip, U.S. cards still use a slightly different protocol. Most credit cards issued in the U.S. use the chip-and-signature protocol, which requires just a signature to authenticate the transaction. But in Europe and elsewhere, merchants may be using the chip-and-PIN system, especially at unattended kiosks that sell train tickets, as well as at gas stations and toll booths. Like an ATM card, the chip-and-PIN system requires the input of a four-digit PIN. Although most chip-enabled cards issued in the U.S. aren’t compatible with the chip-and-PIN standard, a notable exception is Barclaycard, which offers several chip-enabled cards that are compatible with both chip-and-signature and chip-and-PIN systems.

Myth #5: To receive a card with this new technology, you need to apply for a special one.

Several years ago, you would have needed to apply for the right credit card in order to get one with a smart chip. But today, nearly every credit card issued in the U.S. is available with an EMV chip. If your current credit card doesn’t have one, you can simply contact your card issuer and request a compatible replacement. Since these cards are more expensive, many card issuers are issuing chip-enabled cards only upon request or when their customers’ existing cards expire.

More on Credit Cards:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team