This information is provided by our friends at Pentagon Federal Credit Union (PenFed).

Just what are chip enabled credit cards?

With the recent credit card breaches at large retailers, credit card security is on everyone's mind. But you don't have to resign yourself to credit card fraud because new credit card security chip features are headed to the U.S. by the end of 2015.

Also known as “chip and PIN,” “chip and signature,” “Europay Mastercard and Visa (EMV),” “smart cards,” or just “chip cards,” this technology is standard overseas where it has cut credit card fraud significantly.

Let’s go through some of the chip security basics.

What's wrong with the credit card I have now?

Currently, most U.S. credit cards are designed to store data on a magnetic strip and require your signature for identity confirmation. While this process is fairly secure, it's not too difficult to copy the data from the magnetic strip and forge a signature. The U.S. is one of the last remaining holdouts of the swipe-and-sign system, which is a big reason why America is home to almost half of the world's credit card fraud.

What’s the difference between chip and signature and chip and PIN cards?

Chip cards can be chip and signature, chip and PIN, or a combination of both.

Some merchants might request a signature, while others might request that you enter a PIN at the time of purchase. For example, purchasing a train ticket at an unattended electronic kiosk will require the use of a PIN, whereas other merchant locations will need only a signature for verification.

PenFed chip-enabled credit cards are a smart choice because they include both signature and PIN verification.

Why is the U.S. not already using chip and PIN technology?

Switching to chip technology is a sizable expense for financial institutions who issue the cards as well as the merchants who process the cards. Chip cards are more expensive to produce than the traditional magnetic strip card. In addition, merchants need to invest in chip-compatible card readers at the point of sale. The cost has left businesses dragging their feet, but with increasing rates of credit card fraud, chip cards are starting to look a lot more appealing.

Visa and MasterCard are aiming for nationwide adoption of chip cards by October 2015, after which liability for fraudulent transactions will fall upon the financial institutions or the retailers who have not updated their systems to be compatible with new chip cards.

How do I get a chip credit card?

Depending on your financial institution, you might not need to do anything at all. In fact, you might already have a chip card.

PenFed, for example, already issues chip cards for the benefit of its members. If you do not already have a chip card or you are not sure what kind of card you have, you'll want to check with your financial institution to find out when they will be making the transition and what you need to do to get a chip card.

Will there be any other big changes?

When chip cards become common in the U.S., you won't see many differences in how you use your card. For point-of-sale transactions, you will insert your card into a chip reader to make a purchase. Based on preferences between the issuer and the merchant, you will either be asked to sign for the transaction or enter your PIN to verify your identity.

What PenFed credit cards offer chip technology?

PenFed currently offers chip technology on the following select VISA® credit cards:

  • PenFed Platinum Rewards Visa Signature® Card
  • PenFed Platinum Cash Rewards Visa® Card
  • PenFed Gold Visa® Card

What are the advantages to carrying a PenFed chip-enabled credit card?

  • The PenFed chip credit card allows cardholders to make purchases at international chip-enabled merchants where chip cards are the standard form of payment. It provides a higher degree of security against fraudulent transactions because chip cards are difficult to copy and counterfeit.
  • The card still contains a magnetic stripe, which allows cardholders to make purchases in the U.S. where chip readers are less common.
If you have any questions, please call Pentagon Federal Credit Union (PenFed) at 800-247-5626.