Chip and Signature vs. Chip and PIN: What’s the Difference?

We do our best to stay away from complicated industry jargon when we communicate with our customers. The credit card processing industry is complex enough without making it sound like we’re speaking an entirely different language. However, there are a few terms that you should know in order to fully understand your credit card processing. Two of those terms are “chip and signature” and “chip and PIN.” Here’s what these two terms mean and why you should care.

But First, Magstripes

Before we can talk about either of the two main chip-based payment types on the market today, we have to take a look at where we came from. The good ol’ magstripe credit card was the mainstay of the payments industry for years, with its black strips on the back and its promise of one quick swipe to complete the transaction. That black stripe contains secure financial and personal data for the cardholder, and it’s been a target for fraudsters since the credit card was invented. Unfortunately, cybercriminals are getting smarter and magstripe cards have been unable to keep up. Magstripes can be fairly easily hacked, copied, and re-encoded so that fraudsters can go on spending sprees without the cardholders’ knowledge. The industry was overdue for a big change.

The Rise of EMV Technology

Enter EMV technology, better known as the “chip card.” Because these cards store data in a computer chip embedded in the card itself, they’re much harder to hack than magstripe cards. Chip cards actually generate a single-use code during every transaction that’s very hard to duplicate, and because each code can only be used one time there’s not much for an identity thief to go on. But did you know that there are actually two distinct types of chip cards – chip and signature and chip and PIN?

Chip and Signature

The chip and signature card is the most common type of chip card available today. With this type of card, the cardholder dips the card into the reader, removes it when the transaction is complete, and then signs for their purchase directly on the terminal or on a paper receipt. Chip and signature cards are very secure, but there is still some room for fraud to take place. Signatures can be forged, and business owners tend to skip asking for identity verification with chip and signature cards.

Chip and PIN

Chip and PIN cards are the safest of them all. With this type of card, a secret PIN is coded into the card’s chip that is extremely difficult to fake or steal. When the cardholder dips the card, the terminal will then ask them to enter their PIN, similar to a debit card. This is slightly less convenient for the cardholder than a chip and signature transaction, but the increased security is worth it. Unfortunately, chip and PIN cards are not yet widely available, and chip and signature cards remain the norm.

The Future of Payments

The payments industry is always evolving. Trying to keep up with all the changes can be tough, but it’s important to stay informed so that you can protect your data and that of your customers. If you’re still using a terminal that can’t accept chip and signature or chip and PIN cards, you need to change that ASAP. You’re putting yourself and your customers at risk. 360 Payments can help you upgrade your payments security. Give us a call at 1-855-360-0360 or drop us a line on our website. We’d love to help make payments an afterthought for you.

PS – Want to learn more about data security? We’ve got you covered.

PPS – Protect your business from fraud with these tips.

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