What is an EMV credit card, and how does it work?

Though EMV credit cards were invented in the late ‘90s, it wasn’t until 2015 that a nationwide shift to chip cards officially began in the U.S. Today, many of the best credit cards contain this feature and it has become an industry norm.

Want to know more about the ongoing transition and your EMV chip-equipped credit card? Here are eight frequently asked questions to help you understand the changes.

What is an EMV credit card?

EMV – which stands for Europay, Mastercard and Visa – is a global standard for cards equipped with computer chips and the technology used to authenticate chip-card transactions. In the wake of numerous large-scale data breaches and increasing rates of counterfeit card fraud, U.S. card issuers migrated to this new technology to protect consumers and reduce the costs of fraud.

How does it work?

Just like magnetic-stripe cards, EMV cards are processed for payment in two steps: card reading and transaction verification.

“Instead of going to a register and swiping your card, you are going to do what is called ‘card dipping’ instead, which means inserting your card into a terminal slot and waiting for it to process,” Conroy said.

When an EMV card is dipped, data flows between the card chip and the issuing financial institution to verify the card’s legitimacy and create the unique transaction data. This process isn’t as quick as a magnetic-stripe swipe.

“It will take a tiny bit longer for that transmission of data to happen,” Witts said. “If a person just sticks the card in and pulls it out, the transaction will likely be denied.”

Wait, what’s the card called?

EMV cards in the U.S. might be called any of the following terms:

• Smart card
• Chip card
• Smart-chip card
• Chip-enabled smart card
• Chip-and-choice card (PIN or signature)
• EMV smart card
• EMV card

Popular EMV questions

• Why are EMV cards more secure?
• Is card dipping the only option?
• Will I have to sign or enter a PIN?
• If fraud occurs, who will be liable?
• Is the transition to EMV complete?
• Will my chip card work everywhere?
• Can I use my chip card outside the U.S.?

Why are EMV cards more secure than traditional cards?

Put simply, it’s that small, metallic square you’ll see on your card. That’s a computer chip, and it’s what sets EMV cards apart from traditional credit cards that use a magnetic stripe.

Magnetic stripes on credit and debit cards store static data – meaning sensitive information never changes. This can be especially problematic if a credit card is stolen because whoever accesses that data gains the sensitive card and cardholder information necessary to make purchases. That makes traditional cards prime targets for counterfeiters, who convert stolen card data to cash.

“If someone copies a mag stripe, they can easily replicate that data over and over again because it doesn’t change,” said Dave Witts, former president of U.S. payment systems for Creditcall, a payment gateway and EMV software developer.

Unlike magnetic-stripe cards, every time an EMV card is used for payment, the card chip creates a unique transaction code that cannot be used again.

If a hacker stole the chip information from one specific point of sale, typical card duplication would never work “because the stolen transaction number created in that instance wouldn’t be usable again and the card would just get denied,” Witts said.

EMV technology will not prevent data breaches from occurring, but it will make it much harder for criminals to successfully profit from what they steal.

With its introduction to the U.S. market, experts hoped EMV cards would significantly reduce credit card fraud – and so far, it has. According to Visa, since its introduction in 2015, EMV cards have reduced credit card fraud by 76% as the technology became more widely accepted by retailers. In 2015, fewer than 400,000 merchants in the U.S. accepted EMV cards; by 2019 that number grew over 800% to more than 3.7 million merchants.

“The introduction of dynamic data is what makes EMV cards so effective at bringing down counterfeit card rates in other countries,” explained Julie Conroy, head of risk insights & advisory at Aite Group, a financial industry research company.

Is card dipping the only option?

Not necessarily. EMV cards can also support contactless card reading, also known as near field communication. Instead of dipping or swiping, NFC-equipped cards are tapped against a terminal scanner that can pick up the card data from the embedded computer chip.

“Contactless transactions are more consumer-friendly because you just have to tap,” said Martin Ferenczi, former president of Oberthur Technologies, the leading global EMV product and service provider.

After over six years of consumer use, dual-interface point of sale systems – wherein both contact and contactless payment methods are accepted – have become common in the U.S. In fact, some merchants are beginning to move away from accepting physical payment (such as cash) at all, and instead solely accepting NFC-equipped cards or fully virtual cards.

It’s increasingly looking like consumers will have to ditch their magnetic stripe credit cards in the future whether they want to or not. In August, Mastercard became the first credit card issuer to announce that it was phasing out magnetic stripe cards.

“Based on the decline in payments powered by magnetic stripes after chip-based payments took hold, newly-issued Mastercard credit and debit cards will not be required to have a stripe starting in 2024 in most markets. By 2033, no Mastercard credit and debit cards will have  magnetic stripes” the company said in a statement on its website.

Do I still have to sign or enter a PIN for my card transaction?

Yes and no.

You have to do one of those verification methods, but it depends on the verification method tied to your EMV card, not if your card is debit or credit. Chip-and-PIN cards operate just like the checking-account debit card you have been using for years.

Entering a PIN connects the payment terminal to the payment processor for real-time transaction verification and approval.

According to the 2019 Federal Reserve Payment Study, since 2015 “data shows that in-person card payments in the United States have involved not only increasing use of chips but also both rising use of PINs and rising use of chips and PINs together.”

In 2015, 16.9 billion card payments used PIN authentication. Just three years later that number jumped to 26.3 billion and constituted almost 31% of all in-person card payments.

Chip cards, by the numbers

• 1 billion: The number of EMV cards in the U.S. as of 2019
• 3.7 million: Number of merchants in U.S. that accept EMV cards
• 99%: Percentage of payment volume on EMV cards as of March 2019
• 87%: Reduction in fraud losses for merchants that accept EMV cards

If fraud occurs after EMV cards are issued, who will be liable for the costs?

If an in-store transaction is conducted using a counterfeit, stolen or otherwise compromised card, consumer losses from that transaction fall back on the payment processor or issuing bank, depending on the card’s terms and conditions.

Since the Oct. 1, 2015 deadline created by major U.S. credit card issuers Mastercard, Visa, Discover and American Express, the liability for card-present fraud has shifted to whichever party is the least EMV-compliant in a fraudulent transaction.

Consider the example of a financial institution that issues a chip card used at a merchant that has not changed its system to accept chip technology. This allows a counterfeit card to be successfully used.

“The cost of the fraud will fall back on the merchant,” Ferenczi said.

Is the transition to EMV technology complete?

Not yet.

“While most U.S. merchants were required to upgrade by late 2015, gas stations were a notable exception. They secured an extension to April 2021 [citing the cost and logistical burdens of upgrading], and more than half of major fuel merchants still missed the new deadline,” explained Ted Rossman, senior credit card industry analyst at CreditCards.com.

Many consumers are still swiping magnetic stripe cards at gas stations, which makes them “prime targets for fraudsters”, according to Rossman.

Gas stations are quickly becoming the exception, not the rule, when it comes to EMV technology. According to Visa, there has been an 771% increase in the number of merchants who accept EMV cards.

If I want to use my chip card at a retailer that doesn’t support EMV technology yet, will it work?

Yes, but most retailers should support EMV technology, so this shouldn’t be an issue. EMV cards are equipped with both chip and magnetic-stripe functions so consumer spending is not disrupted.

If you find yourself at a point-of-sale terminal and are not sure whether to dip or swipe your card, have no fear. The terminal will walk you through the process.

“For example, if you enter a card into the chip reader slot but the reader isn’t activated yet, it will come up with an error and you’ll be prompted to swipe the card in order to use it,” said Randy Vanderhoof, former CEO of Secure Technology Alliance and U.S. Payments Forum.

And vice-versa.

“If a consumer tries to swipe a chip card instead of inserting it, an error will appear and they will be prompted to insert the card for chip processing instead,” Vanderhoof said.

If chip-card readers are not in place at a merchant at all, your EMV card can be read with a swipe, just like a traditional magnetic-stripe card.

“You can still conduct transactions, you just lose that extra level of chip security,” said Doug Johnson, former senior vice president and chief advisor for payments and cybersecurity policy for the American Bankers Association.

Globally, Mastercard says 86% of face-to-face transactions use EMV technology. In the U.S., it’s 73%, mostly because gas stations and some other (mostly small) businesses have been slow to make the shift.

“It’s important to note that this is mostly a fight between banks and merchants,” explained Rossman. “Consumers have very limited – often zero – liability for fraudulent transactions, especially if we report them promptly. And credit cards have even better fraud protections than debit cards.

Will I be able to use my EMV card when I travel outside the country?

Yes and no.

The U.S. is the last major market still using the magnetic-stripe card system. Many European countries moved to EMV technology years ago to combat high fraud rates. That shift has left many U.S. consumers who have magnetic-stripe cards looking for other forms of payment when they travel.

Since many foreign merchants are wary of magnetic-stripe cards, consumers who hold some type of chip card may run into fewer issues than those without one, according to Ferenczi.

“Just the existence of the chip will likely make European merchants more willing to accept transactions that they wouldn’t have likely accepted if a customer presented a mag-stripe card,” he said, which is good news for traveling U.S. cardholders.

However, chip-and-PIN cards are the norm in most other countries that support EMV technology. So, consumers with chip-and-signature cards may find some merchants who are unwilling or unable to process their card, even though it does have an embedded chip.

But despite any difficulties in the transition, Ferenczi said the change is a step in the right direction.

“Nobody likes to think that his or her card is being secretly used for other purposes,” he said. “So I think regardless, there is a level of comfort knowing that it will be far more difficult to counterfeit EMV cards.”