Chip Embedded Debit and Credit Cards (EMV Chip Cards)
Debit cards and credit cards have revolutionized the banking and payment industry. The volume of financial transactions settled through cards has overtaken payments through cheques and currency in many countries. Along with increase in the volume of debit and credit card based payment settlements, the number of frauds has also gone up compelling card issuers to come up with more security features. While introduction of debit and credit card was the first step towards digital banking, embedded chip card is a recent development that has been gaining momentum.
What are the differences between debit card and credit card?
A debit card or credit card does not need any introduction because of the major role they play in financial transactions. A debit card also known as a bank card is basically a plastic card that is linked to an account which can be used to make payments in e-com sites or shops or for withdrawing money from ATMs. A debit card can be used to the extent of balance available in the linked account as the fund is withdrawn directly from the card holder’s account. Normally no overdraft facility is extended against a debit card and hence any account holder can apply for a debit card. He may have to pay a nominal fee for the card depending on the features of his account scheme and the card issuance terms.
A credit card is similar to debit card in terms of the purposes for which it can be used. It, however, allows the card holder to make payments first and then settle the payments with the card issuer on a periodical basis. Credit card can be used to make payments up to the extent of limit allowed by the card issuing bank or institution and not linked to the balance in any underlying account. As the limit is extended as an unsecured overdraft facility, credit cards are issued only after due diligence of the applicant and his credit worthiness. Credit cards normally allow card holders to use the limit without interest if prompt settlement of overdrawn amount is made in terms of card issuance. If delay occurs, the card holder will be charged interest. Apart from that, delay in settlement may also affect credit score of the customer.
In the case of normal debit or credit cards, the details for identification of card holder and account are stored in a magnetic stripe behind the card. Fraudsters have succeeded in developing new technologies to extract the data stored in such magnetic stripes, counterfeit and commit frauds. Card issues have been in look out for securing cards. Chip card, with a chip embedded in the card, evolved as a more secure alternative. The ordinary cards are also still in use.
What are Chip Cards?
Chip cards look like and do the functions similar to ordinary debit or credit card. Additionally, the chip card contains an embedded chip. The data contained in the chip is in encrypted form which makes it difficult to decode or copy the stored data. However, the card reading components and software in ATMs and Point Of sale machines need to be migrated to same standards to support chip card based transactions. The process needs investment and moving slowly. Due to this delay, cards in many countries still carry magnetic stripe too to enable the customer to transact hazzle free. As the migration improves, magnetic stripes will cease to be used.
What is a Chip in Chip Card?
A chip is nothing but a small, metallic square on the face of a chip card. It is a computer chip that differentiates a chip card from traditional magstripe cards. Magnetic stripes on traditional credit and debit cards store static and unchanging data. Whoever succeeds in copying the data can create copies of the card which can then be used to carry out cash withdrawals from ATMs or purchases. Unlike traditional cards, a chip card produces a unique transaction code, that changes with every transaction. It is very difficult to copy the data in a chip. If at all, somebody succeeds in copying the data, it is impossible to create the unique transaction code for the transaction and the transaction would be rejected. The dynamic data eliminates chances of counterfeit card creation.
What are the advantages offered by Chip Cards and Chip Technology?
The main advantage offered by Chip technology is added security. It is difficult to copy the data contained in a chip or to counterfeit a chip card. The embedded chip ensures better security features and provides better application capabilities. Further, the card holder has to enter the PIN to authenticate a transaction. Many countries no longer support magnetic strip technology and if you are a frequent traveler, it is very much essential to migrate to chip based technology.
Chip Technology is a global standard for cards that contains the embedded computer chips. This technology authenticates chip card transactions. Magnetic stripe based cards are highly prone to frauds. Chip technology offers better protection to customers against counterfeiting frauds.
