Behind Chip and PIN Credit Card Technology

Chip and Pin Credit CardCredit card technology has evolved from the original credit cards in the form of metal tokens to key chains and smart cards. The aim of chip and PIN credit card technology is to help people access money in their banks in convenient ways without jeopardizing the security of their money accounts. Credit cards will always be the easiest way to move money and make credit purchases, so it is always good to use the best and latest means of security and ease of use available.


The first credit cards were in the form of IOU slips that entitle vendors to repayment at future dates. Modern PIN and chip credit cards were first used in the 1970s when banks began to send credit cards in large quantities to their customers. The numbers engraved in the credit cards are processed in banks’ central computers.


Magnetic stripe credit cards have been the standard credit cards used by many people. However, technological advances have enabled banks to create more secure credit cards that have rendered the magnetic stripe varieties outdated. Chip and PIN credit cards use RFID chips to record transactions. Chip and PIN credit cards are becoming increasingly popular today. Some credit card processing firms stopped requiring signatures for purchases under $15. Many credit card companies have stopped transferring information electronically and charging customers additional fees for small credit card transactions.


Increasing technology allows fraudsters to access information in people’s credit cards. For example, in 2009, Alberto Gonzales pleaded guilty to stealing more than 130 million credit and debit card numbers on the Internet. Alberto’s fraudulent actions affected more than 250 financial institutions.

Chip and PIN credit card Technology

There are different ways of making a purchase using a credit card. Swiping a credit card is one of the most common means of making purchases using credit cards. Credit card chip and PIN technology is an easier and faster means of using a credit card. Consumers using chip and PIN credit cards only need to wave their credit cards in front of a scanner for their payment information to be processed. Because the chips are small, credit cards using this technology can be small enough to be attached to key chains.


Chip and PIN credit card technology comes with numerous benefits. Firstly, it provides higher data security. Information in un-chipped credit cards is stored in magnetic stripes. Such information can be copied. Chip and PIN credit card technology is immune to copying or skimming.


Chip and PIN credit card technology was introduced in the 1990’s but did not gain broad adoption in the U.S. because most terminals were not capable of reading chip cards. Lack of modern credit card terminals meant that many people could not use chip scanning to make purchases.

Differences between Magnetic Stripe & Chip and PIN Credit Cards

Chip and PIN credit and debit cards are fitted with small microchips on the front of the cards. The chips allow users to set a four-digit PIN number for the cards. Chip and PIN credit cards are safer than magnetic stripe credit cards because they do not require signature verification to use.

Magnetic Stripe

Magnetic strips on regular credit cards contain all sensitive information on the cards. On the other hand, chip and PIN credit cards encode customers’ information on small microchips. Chip and PIN credit cards are more secure than other types of credit cards because they keep important account details from the retailer’s view.

PIN Transactions

Like bank cash cards, consumers require PIN numbers associated with their chip and PIN credit cards to verify purchases. Transactions involving chip and PIN credit cards are processed differently than those involving magnetic stripe cards. A chip and PIN credit card is usually inserted or waved through a credit card scanner instead of swiped. The shopper then signs a receipt to verify the transaction.


The compatibility levels of chip and PIN networks vary. Some chip and PIN credit cards can only be processed if the cards can also be verified by swiping the magnetic stripe. This is the reason why many card issuers use hybrid chip and PIN cards. This type of card allows users to enjoy greater security offered by chip and PIN credit cards in compatible networks while the magnetic strip allows consumers to use their cards in systems that are incompatible with chip and PIN technology.

Advantages & Disadvantages of Chip and PIN Card Technology

Chip and PIN credit cards are smart cards that resemble magnetic stripe credit cards. Chip and PIN cards store more than users’ financial information including contact details, personal profiles and other types of files. Chip and PIN credit cards use small, embedded microchips to store significant amounts of data, much more than that contained in magnetic stripe cards. While chip and PIN card technology is powerful and considered safe by many people, businesses have to weigh its advantages and disadvantages before adopting it.

Greater Security

Chip and PIN credit cards offer higher security levels than other types of credit cards. The credit cards contain microchips, which are individually encrypted. This means that the data in chip and PIN credit cards is only accessible when users type their PIN. This makes chip and PIN credit cards smart choices for storing highly confidential information including credit card numbers, social security numbers, tax information and even health records.

Data Integrity

One of the factors that many businesses and consumers like about Chip and PIN credit card technology is the high levels of data integrity that the cards offer. Unlike magnetic stripes and other types of cards, once information is stored in a credit card chip, it will remain there forever. Information stored on chip and PIN credit cards cannot be erased, deleted or modified. Information stored in these types of credit cards is also safe against magnets and electrical interference. This makes chip and PIN technology one of the best ways of storing valuable data in a way that cannot be copied.


One of the greatest drawbacks of chip and PIN technology is cost. Compared with other types of credit card technologies, chip and PIN card readers can be quite costly. Many businesses avoid adopting chip and PIN technology because of the extra cost involved. In addition to the extra cost, chip and PIN card readers are not always compatible with other types of credit cards or with each other. Some chip and PIN card readers come with proprietary software that is incompatible with other card readers.