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Asked by Todd L Ross in
Credit and Debit Cards
Accepting Credit Cards

What is the difference between magnetic strip credit cards and chip cards?


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Todd L Ross
September 06, 2019 6:51PM

Chip cards are generally considered to be more secure than magnetic strip cards. To understand why, we need to understand how the two technologies work.

  • A magnetic strip holds information about the card and the cardholder’s account. This is static information—it doesn’t change. Every time you use the card, it sends the same information to the card reader to authorize the purchase.
  • Chip cards use an EMV chip. EMV stands for Europay, Mastercard, and Visa, the companies that developed the chip technology. Every time you use a chip card, the card creates a one-time identifier. That information is transmitted to the financial institution that issued the card, which can then verify that the card is legitimate.

Put simply, EMV chip cards are safer. Each transaction generates a unique code, and counterfeiters can’t recreate that technology—and even if they could, the codes also allow financial institutions to log information about transactions, including location. Criminals can’t use chip cards without significantly raising their chances of getting caught.

In the United States, all retailers are adopting the EMV standard. Most have already complied, but gas stations have lagged behind due to the relatively high cost of conversion for pay-at-pump card readers. Visa and Mastercard have set an October 2020 deadline for gas stations, which should drastically limit credit card fraud nationwide. EMV chips don’t provide complete protection, but Mastercard has reported an 81 percent reduction in fraud losses from 2015 to 2018.