What is Credit Card Encryption?

Credit card encryption is a security measure intendꦡed to reduce the likelihood of credit card information being stolen and used in fraudulent transactions. Credit card encryption involves multiple stages of a transaction, star♓ting with encryption features on the card itself.

How Credit Card Encryption Works

When a credit card holder uses an encrypted card to make a purchase, their account number andᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚ other important information is scrambled by an algorithm. The intent is to make it impossible for anyone to obtain that information without the corresponding encryption key.

Card issuers can use a variety of methods to encrypt their cards. The most prominent system in use today involves a small, square microchip known as an EMV chip embedded in the physical credit card. While today's credit cards often have both chips on their front side and magnetic stripes on the back (giving the cardholder the option to dip, slide, or tap their card at a credit card terminal), the older stripe technology is more vulnerable to theft, through a process known as skimming.

In skimming, thieves would often insert devices known as skimmers on ATMs and gas station pumps, which could read the information on the stripe and either store it for later retrieval or transmit it wirelessly to the criminals. They could then use it to 澳洲幸运5官方开奖结果体彩网:create duplicate cards and charge purchases to the unsuspecting cardholder's account. According to the FBI, skimming cost financial institutions and consumers $1 billion a year.

While not invulnerable to skimming, or a related technique known as shimming, chip technology makes it far more difficult. EMV chips (EMV stands for Europay, Mastercard, and Visa, three companies behind its launch) were in wide use in Europe by the early 2000s but proved slower to catch on in the United States. According to EMVCo, the industry organization that oversees the technology, "At the end of 2021, 12 billion EMV chip cards were in global circulation."

As Visa explains, unlike a magnetic stripe, which contains unchanging information, the EMV chip "generates a dynamic one-time use code for each transaction called a cryptogram. Because the cryptogram changes with every transaction, even if the card data is stolen, the information can't be used to create counterfeit cards because the stolen cryptogram would have already 'expired.'"

As an added layer of protection, merchants may require the cardholder to provide a signature or PIN number, commonly known as 澳洲幸运5官方开奖结果体彩网:chip-and-signature or 澳洲幸运5官方开奖结果体彩网:chip-and-PIN transactions.

Some newer cards, such as the Mastercard Biometric Card, allow users to prove their identity with a fingerprint.

How Effective Is Credit Card Encryption?

Because of encryption, today's credit cards are much less vulnerable to fraud than those of years past.

However, while chip technology has been relatively effective in thwarting skimming, it has still left cards vulnerable to theft by other means, such as in online transactions where the customer simply supplies their number and the chip is not involved, sometimes referred to as a "card-not-present" transaction.

For such transactions, online merchants will often request the card's CVV (for card verification value) or CID (for card identification) code, a separate three- or four-digit number on the front or back of the card (and also encoded in the chip). That provides some additional security because thieves who have obtained the card number but not the physical card will be unable to supply it if they're asked to.

The Bottom Line

Credit cards are not only convenient for consumers and merchants—and lucrative for the banks that issue them and networks that process them—b💛ut very attractive targets for thieves. As the industry tries to stay at least one step ahea꧋d of the criminals, it is increasingly relying on encrypted chip technology as its first line of defense. To date, that has proved reasonably effective.

Even so, consumers should still take their own steps to safeguard their accounts, including keeping a close eye on their credit and debit cards, checking their monthly statements for errors, and being careful about sharing their card numbers, PINs, and CVVs with anyone else. While consumers' liability is limited by law if their card information is compromised, straightening out the matter can be time-consuming and aggravating.