Lately, I’ve been confused and maybe you have been, too. Unless you’ve been living in a cave, you’ve probably heard about credit cards with smart chips. You may even have one.
My confusion is the result of technology overload. All of a sudden there’s chip & PIN, chip and signature, RFID, NFC, contact and contactless smart cards, and, of course, Google Wallet.
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A more accurate headline would be: Smart cards not perfect but safer than magnetic stripe cards. You might even choose to eliminate your wallet at some point in the future and pay with your smart phone. Hysteria not necessary.
Then, we also see the headlines screaming “Contactless smart cards are security risks!”
Doesn’t have the same pizzazz, I know. When I got my own contactless smart card in the mail, I decided it was high time to write an article that described in Plain English how contactless smart cards work and whether or not it’s a security risk.
I’m going to briefly explain (no super high-tech stuff!) how a few types of cards with smart chips work so you will understand the basic differences. Forget NFC for now because that’s the technology used for mobile payments, like the kind you can make with Google Wallet.
Contact smart cards
Just so you know, the standards for chip card technology are set by EMV, which stands for Europay, MasterCard and Visa. These are the companies that originally developed the EMV specifications for chip cards. Sometimes, you’ll see smart cards referred to as EMV smart cards.
Contact smart cards are exactly what the name implies. The card has to be inserted into a card reading device to work. The card has a silver or gold-plated square on the front and the microprocessor is right behind that square. When the card makes contact with the reader, the microprocessor chip “talks” to the reader. As they talk, information is exchanged. So that’s how “chip card technology” works.
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Chip and PIN vs. chip and signature
For years, we’ve heard stories about Americans going to a foreign country and in some places, were unable to use their magnetic stripe cards. This is because, in Europe, chip and PIN cards are all over the place. Chip and PIN cards require entering a PIN, just like you do when you use your debit card.
Image: gagilas, via Flickr