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Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. SHARE: insta_photos/iStock/Getty Images August 27, 2021 Checkmark Bankrate logo How is this page expert verified? At Bankrate, we take the accuracy of our content seriously. "Expert verified" means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Their reviews hold us accountable for publishing high-quality and trustworthy content. Ted Rossman is a senior industry analyst at Bankrate.com. He focuses on the credit card industry and helps consumers maximize rewards, get out of debt and improve their credit scores. Mariah Ackary is a personal finance editor who joined the Bankrate team in 2019, excited by the opportunity to help people make good financial decisions. Send your questions to Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired. Terms apply to the offers listed on this page. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer. Bankrate logo The Bankrate promise
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Once upon a time, magnetic stripe cards were cutting-edge technology, but that era has long since passed. They replaced the “knuckle-buster” machines that created carbon copies of the raised numbers on the fronts of credit cards. The main problem with magnetic stripes is that they pose major security risks. The stripes include sensitive information such as the cardholder’s name, address, account number, expiration date and card verification value. The fatal flaw is that this information is static. The chip-enabled (EMV) credit cards that became common in America in 2015 improve upon this technology by generating temporary authentication codes for each transaction. So while a magnetic stripe card could fall victim to a —a tactic criminals employ in order to clone a physical card—an is much more secure. If a crook steals the authentication code, it’s akin to an expired password and essentially useless. It’s important to note that EMV cards aren’t perfect, since they don’t offer extra protection for online transactions, but they have dramatically reduced in-person fraud. Retailers reluctance
The retail industry fought the EMV transition because of the cost and complexity, but also because it shifted the burden for in-person fraud to retailers that had not upgraded their payment terminals (as long as the customer used a chip-enabled card). Before EMV, banks footed the bill for all in-person fraud. Gas stations secured a five-and-a-half-year extension (until April 2021) to make the EMV conversion. They successfully argued that their cost and logistical burden was so great that they required more time to make the switch. More than half of fuel merchants still , according to ACI Worldwide, which is another indication why the U.S. is not going to be among the first countries to ditch magnetic stripes. While Mastercard says 86 percent of face-to-face transactions employ EMV technology globally, it’s just 73 percent in the U.S., and gas stations are a major reason for that. Fraudsters tend to pursue the lowest-hanging fruit, so gas stations that have not upgraded their systems are taking on sizable financial risks. Some small businesses have not upgraded to EMV terminals either. What s next
If chip cards represent the successors to magnetic stripes, then are a half-measure beyond them. Contactless payments—tapping a card or phone on or near a payment terminal—rely on much of the same underlying technology as EMV transactions. This includes one-time encrypted tokens, and most payment terminals that can accept chip cards can also accept contactless payments. The tap feature relies upon near-field communication (NFC) technology, a form of radio frequency identification (RFID). While this functionality has been widely available in the U.S. for about seven years, it really started to take off during the COVID-19 pandemic as consumers worried about touching potentially germy payment terminals. In fact, are even more secure than paying with chip-enabled cards because mobile payments incorporate a biometric component. The cardholder proves it’s them by scanning their fingerprint or face with their smartphone. Mastercard and others are even working on . I suspect that smartphones are so popular that this step may not be needed, but time will tell. One thing’s for certain: It’s time for magnetic stripe cards to go the way of the dodo. Have a question about credit cards? E-mail me at and I’d be happy to help. SHARE: Ted Rossman is a senior industry analyst at Bankrate.com. He focuses on the credit card industry and helps consumers maximize rewards, get out of debt and improve their credit scores. Mariah Ackary is a personal finance editor who joined the Bankrate team in 2019, excited by the opportunity to help people make good financial decisions. Send your questions to Related Articles