With credit card fraud becoming easier and large breaches from major corporations like Target and Home Depot becoming the norm, there is a big push toward a new system of credit card use. But, what are chip-and-pin cards and how will they help protect your identity and credit information?

Creating a New Standard

You may have noticed your new card has a metal chip embedded above the account number. These are EMV cards — Europay, MasterCard and Visa — named after the three companies that created the standard years ago. Since it's creation, EMV has become globally accepted with all the major credit card companies signing onto the new system. 

It's been used around the world for years and the U.S. is one of the final markets to become EMV compliant. With many corporations holding to an October 2015 implementation deadline and President Barack Obama recently signing an executive order calling for the transition, EMV cards are coming fast.

How it works

In order to understand how EMV works and why it's considered a safer method, let's first look at the current standard.

The magnetic strip standard was first developed by IBM in the 1960s. The credit card information, including the account number, is stored on the strip and is transmitted to banks at the point of sale.

It's basically the similar to the old imprinting method, but with less paperwork.

Hackers can easily intercept the information stored on the strip as it is sent to the banks. EMV cards change that process.

The information stored on the chips are encrypted, unintelligible to anyone other than the issuing bank, which can decrypt the information and process the payment. Even if the encrypted information is stolen and re-transmitted by hackers attempting to make a purchase, the banks will know it is being done so without the chip. EMV cards also require the cardholder to enter a PIN at checkout, offering a second level of protection.

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