Chip-and-PIN versus Traditional Signature Cards

Europe (and pretty much the rest of the world) are quickly adopting a new credit card standard with Chip-and-PIN. Here’s everything you need to know about the new format.

This might not come as a shock to anyone who’s ever travelled, but America is quite a bit different from other countries. It would take up several lifetimes to try and enumerate every difference or even the most obvious. As a credit card processing company, we’ll pick a big difference that’s quite germane to our line of work: chip-and-PIN credit cards (also known as EMV cards, which stands for Europay, MasterCard, and Visa). These newer format of cards have been rapidly adopted as the standard in Europe and indeed all over the world, but not yet here in the states. Let’s take a look at them, the primary differences between them and our current standard of credit cards, and if we’ll be moving to adopt them as our standard in the near future.


In an earlier article from our blog, we got into the process of how our traditional credit cards work. A big part of that was devoted to the magnetic strip you see on the back of the card. EMV or chip-and-PIN cards definitely contain a mag strip on the back, but they also feature an embedded computer chip, which you can see prominently displayed on the front of the card as a small metallic square. (NOTE: This refers to the first generation of EMV cards, which are already in many hands across the world. The push is for future versions to feature ONLY the chip and get rid of the mag stripe completely, but the process has been slow going, especially here in America.)

This metallic square is a microchip that essentially “talks” to the reader and creates a unique bit transaction data each time it’s used. That data can never be reused. The cards are inserted into the reader, and the card holder enters a secret pin to proceed with the transaction while the card is still in the reader, and assuming everything matches, the sale goes through.

With a traditional signature card, the information contained in the mag strip never changes. If nefarious parties were able to get that information (as they so often are with multiple billions of dollars’ worth of credit card fraud committed each year), they would have all they need to use your card. With an EMV card, you need the magnetic strip information PLUS the chip transaction code and secret PIN number for a sale to go through. Without physically having the card in their possession, this makes traditional card fraud all but impossible for thieves.


Obviously, the scenario we just talked about is the biggest advantage to chip-and-PIN cards – much greater security. Over the past few years, the massive consumer data breaches at Target, Home Depot, Michaels, and others have left many customers at a hugely increased state of risk for credit card fraud. As mentioned above, if a data breach occurs that has swiped your traditional signature credit card and has it stored in any fashion, a hacker will be able to use your credit card with the static information stored on the card’s mag stripe. With EMV cards, that data would be useless without the microchip.

Over 130 countries have already adopted chip-and-PIN cards as the standard, and have seen notable reductions in the amount of credit card fraud. In fact, the recent rise in fraud here in the United States has been at least in part attributed to scammers moving their scams away from countries with EMV standards and into the U.S., one of the few major countries to still have signature cards as the standard.


You can still use most chip-and-PIN cards at retail outlets that have traditional card readers, so long as it has a magnetic strip on the back. But increasingly today, more and more merchants and retail outlets that reside in countries where EMV is the standard have switched to full EMV merchants, meaning your traditional signature card will not work there. This is more of a disadvantage to the card holders themselves rather than of the chip-and-PIN format itself, but it’s important to be aware of before you travel abroad.

One of the biggest reasons why EMV adoption has been slower in America compared to many other countries comes down to liability. As anyone who’s ever been the victim of credit card fraud or a stolen card will know, almost all financial institutions and card issuers accept the liability for these cases. If someone steals your card or its mag strip information and racks up thousands of dollars in fraudulent charges, you thankfully don’t foot the bill – the issuer does. With chip-and-PIN systems, it’s a bit different. If you have an EMV card with a mag strip and use it at a place of business that doesn’t accept EMV style transactions, that opens up the possibility for a fraudulent or counterfeit card to be used. In the eyes of issuing institution, that’s the fault of the merchant for not upgrading to the latest and most secure system, and they would thus be liable for the charge.

The biggest card issues have shared their schedules for when the shifts to chip-and-PIN must take place, and are detailed all the way through October 1, 2017. Most credit experts expect the U.S. to get caught up to the rest of the world in terms of EMV, but it will be more of a gradual change than an overnight shift, even with the deadlines set.

Contact the Experts

There’s a lot more detail regarding the switch to chip-and-PIN cards than we have room to talk about here. And if you’re a merchant, the questions and intricacies get even more complex depending on your exact situation. Contact us today if you’re interested in more information and how we can help.

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