What is a Chip Card? Types of Chip Cards and How It Works

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What is a Chip Card? If you have ordered a new credit card or debit card from your company, you might have simply received a chip card without knowing it. But you should not panic because having a chop card is a good thing. So many card issuing companies have switched from the traditional types of cards that they use to give to customers to the new chip cards. That being said, today we are going to be taking a look at what a chip card is.

What is a Chip Card?

The idea of having a new type of card should not be frowned upon by customers because there are certain benefits these types of cards have over the previously used ones. In today’s article, we are going to be taking a look at the chip card and its benefits. We are also going to dive into how they work and many other things. So do stay tuned and make sure you don’t go anywhere but read this article to the end.

What is a Chip Card?

A chip card is simply your normal standard plastic debit or credit card, but the difference between this one and the old one is that it contains an embedded microchip. Apart from the microchip it contains, there is also a traditional magnetic stripe at the back of the card. The major reason why everyone is switching to these types of cards is the fact that they encrypt information so that data security is increased.

One of the flaws of previous widely used cards is that information is not encrypted, resulting in less secure security than this. But with a chip card, you can make transactions at stores, terminals, or any automated teller machine without risking your security. Chip cards are now known by many names, one of them being smart cards.

How does a Chip Card Work?

The chip card works like any other type of credit or debit card. In the sense that they function in the same way as their older counterparts, chip cards have a small silver or gold microchip which is embedded, usually on the front of the debit or credit card. It is this statement that contains the information about the account associated with that credit or debit card.

To make use of this, the cardholder must first insert it into a machine, which is also called a chip-enabled terminal. which is basically a machine that is capable of reading the information contained in the chip. When that is done, a terminal reads the information contained in the credit or debit card and sends it to the merchant or the card service provider. Then whatever transaction the person wants to carry out can now be carried out.

Types of Chip Cards

There are various types of chip cards that are available for consumers or customers. The main distinguishing feature among these cards is the fact that some of the cards do not require an extra step before making a transaction. While others can simply be used just by slotting them into a terminal and then making the transaction without any extra steps. That being said, below are the types of chip cards available:

Chip and Signature Cards

For the chip and signature cards, a customer requires a signature in order to complete a transaction after the card has been slotted into a terminal. When these types of cards are slotted into a terminal, the information contained in the chip is read by the terminal and then sent to the financial institution. It is only after the transaction is approved that an additional signature is needed before the transaction is complete.

Chip-and-pin Cards

Chip and pin cards go the extra mile by providing an extra layer of security for customers to protect their accounts. Once a card is slotted into a terminal and the information is read and sent to the financial institution, the transaction will be initiated. Of course, the production needs a signature in order to be completed. But after inputting your signature, a pin is required before the transaction is finished.

The thing, in this case, is the extra security that is needed to complete a transaction with a chip and pin card. Therefore, to use a chip and pin card, a customer is required to enter their personal identification number in order to make purchases or do any transaction.

Benefits of Chip Cards

If you are making use of a chip card, there are many benefits to doing so. However, if you are not yet using one, it is high time that you switched. Below are some of the benefits of having a chip card. I hope these benefits might convince you to switch to them today.

  • It provides an additional layer of security because of the use of an embedded chip.
  • Encryption security provides an additional layer of fraud prevention.
  • It makes transactions more secure by encrypting information when used in a chip-enabled terminal.
  • can be used to locate your card when it is slotted into a terminal in case it is lost.

Do I really need a Chip Card?

The answer to this question is a very big yes. You definitely need a chip card, mainly because of the added extra layer of security it has. Anybody planning to continuously make payments using the card domestically or internationally definitely needs a chip card for that. Another reason is that many retailers might not accept the old type of card anymore, so you definitely need a chip card.

Chip Cards Frequently Asked Questions

What does a Chip Card Do?

As the name suggests, it is a credit or debit card that has a chip in it that encrypts the information contained in that account associated with the card. Encryption is necessary to prevent fraud and give the car an extra layer of security. It also allows them to make transactions in various stores, terminals, or even ATMs.

How do you use a Chip Card?

Using this is easy. All you need to do is simply insert the card into a terminal that is capable of reading the encrypted information. Then make your transaction and then enter your pin to confirm the transaction for it to be completed or go through. Once you are done, you can simply take your card from the terminal and go your way.

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