Chip cards, also known as EMV cards or smart cards, are the latest in the industry trend to fight identity theft. After a series of security breaches and data hacks, credit card companies began sending out cards with chips in them to prevent identity theft. Chip cards are now the norm and millions of retailers are rapidly working to get up to speed on chip technology. But how do chip cards work and do they make consumers any safer?
How chip technology works
Chip technology was developed to combat identity theft by changing where credit card information is stored. Instead of storing credit card data in a magnetic strip on the card, which was vulnerable to copying, credit card data is placed in the chip. Every time someone uses a chip card, they must enter a four digit pin to complete their transaction.
Chips are different from magnetic strips because they create a unique code for every transaction, making it impossible to use the card by simply copying this information.
Are chip cards safer than credit cards with magnetic stripes?
While chip cards are not fool proof, they are effective for reducing card duplication, which was a rapidly growing area of card fraud. Fraudsters would use a device to copy the content on a magnetic stripe and use that to create a fraudulent duplicate card they could use on transactions. According to data from creditcards.com, retailers who have embraced EMV technology have seen counterfeit card fraud drop by 43 percent and 54 percent for respectively for Visa and Mastercard cardholders. Mastercard reported an increase in fraud by 77 percent for retailers who do not have terminals that read chip cards.
This does not mean that fraud went down. The advent of chip technology has forced criminals to become more sophisticated and to try to use other means to obtain private data. Phishing scams using email and social media are on the rise. A study by Javelin found that identity theft in the United States rose 16 percent between 2015 and 2016, which should put all consumers on alert.
What you can do if you have been a victim of identity theft
If you have been the victim of identity theft by a phishing scam or some other type of credit card fraud, it is possible to restore your credit. Talking to a consumer rights attorney is often the best place to start, so you can recover your life again.