What're the Little Gold Chips on Our Debit Cards For?

You've probably had the awkward experience of purchasing an item at a store, swiping your debit or credit card, and having the cashier tell you, "Please insert your chip." Or maybe you've inserted your card's chip only to have the cashier say, "Please swipe." 

Actually, you've most likely experienced both instances, assuming you buy things at stores and don't dumpster-dive or shoplift or subsist solely on manna from heaven. If you're like me, you've probably wondered what the little golden chip on my debit card was, how it works, or if people are just full of hot air when they tell you it's "safer."

So I googled what the skinny on these chips were figuring it had something to do with computer science, and (for once) I was right. Here's how it works, and how it apparently protects us consumers against fraud:

Interestingly enough, it turns out that much like marriage equality and affordable healthcare, cards with chips are a global trend that America has been slow to adopt. They've already been used for years by over 80 other countries. They're called EMV cards (the acronym stands for Europay, MasterCard, and Visa) or smart cards. (They might be smart, but are they smart enough to know why kids love the taste of Cinnamon Toast Crunch? I doubt it.)

Cards that use magnetic stripes on the back--that's how we've normally been doing it--store data that stays exactly the same with each new purchase. Therefore, any old counterfeiter with access to that data could use it to uncover enough information about the cardholder to make purchases under their name, which would not be all too favorable.

But EMV chips are different. Every time it's used for a new purchase, the chip creates a new transaction code that can never be used again. So even if a hacker gets his or her hands on that sweet, sweet, data, it won't matter a lick, because the next time the customer buys something, the card will use an entirely new set of data.

"The introduction of dynamic data is what makes EMV cards so effective at bringing down counterfeit card rates in other countries," says Julie Conroy, research director for retail banking at Aite Group, a financial industry research company.

I really hadn't a clue about any of this stuff before reading about it. Now I'm pretty okay with inserting a computer chip on my card, even if it does take a little longer than swiping a mag stripe. I guess this all just goes to show how important--and powerful--data is.

I bet this teen social outcast from the 90s who's brandishing her credit card really wished she could travel to the mid-2010s and use an EMV chip card, because clearly so much of her money's been stolen by counterfeiters that she can't even afford an undershirt. Shame, really.

(I just wanted to use a weird stock photo, okay?)

Sources

• CreditCards.com: 8 FAQs about EMV credit cards
• YouTube video: How do EMV Chip Cards work?
• Visa card example image
• Social outcast teen displaying her credit card