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September 17, 2020 Credit Cards

What is an EMV Chip-Enabled Card?

Chances are, you have at least one EMV chip-enabled card in your wallet. EMV, which stands for Europay, Mastercard and Visa, and has been used for years throughout the world. In 1015, a mandate went into effect that outline fraud liability between financial institutions and merchants. The solution, integrating EMV chip technology into our everyday lives.

Here’s what you need to know about these chips.

1. Increased protection against fraud

The number one reason the U.S. made the switch to chip cards was to curb rampant merchant breaches and credit card fraud.

Experts pin the high rate of fraud on the outdated system the U.S. had been using. The magnetic strips on your old credit and debit cards store static, unchanging data. That means anyone who gets their hands on that data can do whatever they want with it, like racking up huge bills, emptying accounts and taking out loans in your name.

In contrast, EMV cards create a unique transaction code for each purchase you make. That code cannot be used again, so even if a fraudster steals the chip information from a point of sale, they won’t be able to use that transaction number for another purchase. The data transmitted during each transaction is also encrypted, adding more to the security measures it offers.

EMV technology will not prevent data breaches from occurring, but it will make it much harder for criminals to profit from what they steal. Experts are hopeful this shift will significantly reduce credit card fraud in the U.S., and studies show that U.S. counterfeit fraud rates have already decreased. According to Visa, chip-enabled merchants saw a significant drop in fraud.

2. How it works

When your chip card is used, data is transmitted from the card and the issuing financial institution to verify the card’s legitimacy and to create the unique transaction code. This process will take a bit longer than a swipe.

Aside for inserting a card, EMV cards can also support contactless card reading, also known as near field communication, or NFC. NFC-equipped cards are tapped against a terminal scanner, which reads the data from the card’s embedded computer chip. Although this type of transactions is faster and more consumer-friendly, the equipment needed to scan them is expensive, so this option is not yet widely available.

3. Fraud liability changes

The shift to EMV presents several changes for merchants and financial institutions. Issuing new cards and purchasing new processing technology was an expensive undertaking.

But there’s more than just cost involved. The switch to EMV represents new liability rules.

Though fraud is harder to pull off with chip cards, it’s still possible. In the event that an EMV card is frauded, who is held responsible?

Since the Oct. 1, 2015, the liability for card fraud has shifted to whichever party is the least EMV-compliant in the transaction. This means if the merchant is not equipped with chip-card reading equipment, they will be held responsible. If the consumer’s financial institution has not provided them with an EMV card, they’re footing the bill.

So, while replacing payment processors and issuing new cards is an initially expensive venture, it will save businesses and financial institutions the huge cost of being held responsible for fraud payouts in the long run.

4. Consumer Still Need To Be Mindful of Online Fraud

Though the EMV transition helped cut in-store fraud, it could gave consumers a false sense of security online. Chip card or magnetic strip, for an online purchase, makes no difference at all. When buying something on the internet, it’s up to you to be extra vigilant and ensure you aren’t becoming a victim of fraud.

Fortunately, there are ways to protect yourself against online fraud.

  • Always shop with a reputable retailer.
  • Read reviews before sharing your card information.
  • Never give personal information over email.
  • Don’t authorize a wireless money transfer for a website or merchant if you are not familiar with them.
  • Consider using tokenized systems like ApplePay, where your personal information is transformed into a numerical token instead of an actual card number.


This article is for educational purposes only. Tulsa FCU makes no representations as to the accuracy, completeness, or specific suitability of any information presented. Information provided should not be relied on or interpreted as legal, tax or financial advice.