How Chip and PIN Credit Cards Work

Chip and PIN in America

Why is the United States one of the last countries in the world to adopt chip and PIN credit cards? First of all, America has a strong telecommunications infrastructure, making it easy to instantly authorize purchases made with a magnetic-stripe card, so offline capability is not so attractive. Second, credit card fraud was historically concentrated in other countries, which made them more eager to embrace chip and PIN technology.

Finally, it will cost American retailers and banks around $8 billion to make the switch, between upgrading the credit cards themselves as well as the readers used in retail establishments [source: Schneider]. (It costs around $2 to produce and distribute a magnetic card and $15-$20 to produce and distribute a chip and PIN card [source: Bell].) And, the credit card market in the U.S. is so large and complex — more than 15,000 American banks issue cards — that it's more difficult to implement widespread changes than in countries with a more centralized banking and credit system [source: Ghahremani].

But, high-profile attacks like Target's and the rising concentration of credit card fraud in the U.S. have changed minds. America's largest two credit card companies, Visa and MasterCard, have a roadmap in place for switching over to chip and PIN credit cards by October 2015. Visa and MasterCard won't force banks and merchants to issue the new cards, but they will hold them liable for fraud that occurs with older, magnetic-stripe cards [source: Gara]. In preparation for the switch, large retailers like Wal-Mart and Target have already invested in checkout terminals that can process chip and PIN cards [source: Schneider].

For lots more information on how credit cards work, how to avoid identity theft, and tips for traveling abroad, check out the related HowStuffWorks articles below.

Author's Note: How Chip and PIN Credit Cards Work

The world is such a different place than when I first traveled abroad 20 years ago. Back then, ATM machines were still a relatively new luxury in many countries and the foreign transaction fees for ATM withdrawals and credit card purchases were through the roof. Most international travelers still relied on traveler's checks, which offered protection from loss or theft, but still had to be cashed in for the local currency. It's good to see that U.S. banks are finally catching up with a technology that's already standard abroad. It will make it even easier for Americans to travel without the hassle of making currency conversions or fumbling with an unmanned ticket kiosk at a train station that doesn't recognize our out-of-date magnetic-stripe cards. If the technology switch works, maybe we can even start talking about the metric system. Nah!

Related Articles


  • Bell, Claes. "Are Chip and PIN cards coming?" (May 14, 2014)
  • Credit Card Forum. "Chip and PIN credit cards in the USA for 2014?" March 17, 2014. (May 9, 2014) and PIN-credit-cards-usa/
  • EMVCo. "A Guide to EMV." May 2011. (May 9, 2014)
  • Floum, Jessica. "Consumers' online information needs better protection, Senate committee says." United Press International. Feb. 5, 2014 (May 9, 2014)
  • Gara, Tom. "October 2015: The End of the Swipe-and-Sign Credit Card." The Wall Street Journal. Feb. 6, 2014. (May 9, 2014)
  • Ghahremani, Yasmin. "American travelers' 2012 guide to chip and PIN cards." June 21, 2012. (May 9, 2014)
  • Harris, Elizabeth; and Perlroth, Nicole. "Target Missed Signs of Data Breach." The New York Times. March 13, 2014. (May 9, 2014)
  • Hu, Elise. "Analysts: Credit Card Hacking Goes Much Further Than Target." All Tech Considered. Jan. 17, 2014. (May 9, 2014)
  • Kiernan, John. "Chip and PIN vs. Chip-and-Signature." CardHub (May 9, 2014) and PIN-vs-chip-and-signature/
  • Schneider, Howard; Tsukayama, Hayley; and Jayakumar, Anrita. "U.S. credit cards, chipless and magnetized, lure global fraudsters." The Washington Post. Jan. 21, 2014. (May 9, 2014)