If you have applied and got your credit card approved in the past, at this moment we are sure that you are still adjusting life with chip cards (other country call this as “smart card”).
I remember in the past when I used to purchase food and the store clerk remind me about my card to take out on the reader before leaving.
For the record, 3 of 10 forget their cards after putting it on the machine. The data seems not good, but for chip cards, every transaction done becomes much safer.
So the question now is how it works?
New chip cards considered as more secure than the old one, so we need to understand why. First let’s look back the old system design. Your old cards has “black strip” that strip out there is magnetic.
Amazingly the black strip has coded information connected to your account. So when you do the swiping of your card, the machine reader connects the information to your card with the account and to the transaction that is being processed.
Obviously, all the information on the card does not change even a single.
Since it is somewhat a like coded book, so when it is read (the card), all your information will be available.
And now comes the major problems.
- First one is if someone without your knowledge clones your card using the popular skimmer machine, doing it will give them ability to access your personal account and can even steal your identity.
- Second problem, every store wherein you submit your card gives them the authority to gain access on your full account every time a transaction is being processed. Therefore, if there is an information break, thieves can get in your account and do as they please.
So let us move forward to the new generation or the latest system, the main reason these new made cards called as “chip card” because it has the capability as of a computer thru a chip.
Meaning this chip represents massive change when data is shared via card.
So meaning, rather than sending account information as traditional way, the new chip creates secured yet unique onetime special transaction code. And of course the special code is for a specific purchase only no other.
So meaning if data is breach in a certain store where the card is used, rather than stealing all account information, thieves can only steal the special unique transaction connected to the purchases. But since the code only used one time, the data that has been stolen becomes worthless.
The situation also explains why new process we have now becomes a little bit longer compared to the old one.
So when after situations wherein you “dip” your special card chip, the conversations begins and verifies the availability of the funds needed and then it creates a transaction to complete the overall transaction.
Every transaction is carefully analyzed in a secure way. We know that frauds on credit card are massive. Looking back, the cost of damage from card fraud will look back to its issuer. But this time it is no longer the same.
After October of 2015, liability is directed to party compliant to the fraud security measures.
In short, if you have your chip card, but the certain store you are shopping does not have the needed machine for them to process your chip cards, the store then will become liable if ever data becomes breach after the card has been used.
And also even though store has its chip readers but consumers don’t have chip cards, any losses that could happen will be the liability of the issuer.
By these, it enables both parties to integrate with the new technology and keep data safe. It may somewhat take a little time to get to used to, with the release of new chip card the added special fraud protection it offers will help protect both.