Best EMV Chip Credit Card for Cashback Rewards
When you are looking for cashback rewards, the EMV-equipped Discover it® Cash Back card is a credit card to consider. This card offers 5% cash back at different places each quarter like grocery stores, restaurants, gas stations, select rideshares and online shopping, up to the quarterly maximum when you activate. Plus, 1% unlimited cash back automatically on all other purchases. Rewards can be redeemed at any time, and for any amount as cash back or statement credits.
Why has it taken so long for the EMV system to be adopted?
The EMV smart chip technology dates back to the early 1990s when it was introduced in Europe. (EMV stands for Europay, MasterCard, and Visa — the three companies that were originally behind its creation.) Although Europe and other parts of the world embraced the new standard early on, the US credit card industry made the decision to forgo EMV smart chips and focus on other types of fraud-prevention methods for the next 20 years.
But after several high-profile data breaches that struck some major American retailers, it became clear that our credit card industry needed to move beyond magnetic strips, and quickly. On October 1, 2016, the industry underwent a so-called “liability shift,” which meant that the cost of a fraudulent transaction would fall on either the retailer or the card issuer, whichever had chosen not to use the latest EMV smart chip-enabled cards or card readers.
This soft deadline, along with the high cost of EMV chip readers and software, resulted in a very slow rollout of smart chip technology at most stores. One year after the liability shift, your chances of finding a working chip card reader at each store you visit are just one in three. And, while most new credit cards issued will include an EMV chip, few card issuers are proactively replacing existing credit cards when they expire.
How do chip cards work?
Before debunking the chip-cards-are-foolproof myth, it might be helpful to know what a chip card is and how it provides extra security. Chip cards feature EMV chips, easily visible on the cards. These chips enable a new, unique code each time you purchase something at a point-of-sale (POS) system. In other words, when you “dip,” or insert your card into a POS system, a new code is generated for that transaction, making it more difficult for fraudsters to trace the transaction to your card number.
The chip card is an improvement upon its predecessor – a magnetic stripe. When a card with a magnetic stripe is swiped at POS systems, your card’s number, instead of a unique code, is associated with the transactions. This was partly the reason why the 2013 Target breach impacted so many consumers — magnetic stripes were used to pay for purchases, which meant the malware-laced POS system collected consumers’ credit card numbers. Because of the way chip cards work, as opposed to magnetic stripes, chip cards are better at preventing some types of fraud, including card skimming (i.e., harvesting payment information from your card’s stripe through a card-reading terminal, usually by attaching a physical device to the terminal).
While the chip card’s emergence in the U.S. may have led to a 70% decrease in counterfeit dollars between December 2015 and September 2017, chip cards do not make you impervious to fraud. Keep reading to learn why this tech advancement isn’t able to completely protect you and your financial health.
Do chip cards protect you from online fraud?
As chip cards proliferate in the U.S., some claim that more fraudulent activities are being moved online. The argument is that chip cards make it more difficult to copy credit card information onto a counterfeit card (e.g., skimming payment cards to create counterfeit cards) because each transaction has a unique code. As a result, fraudsters, after noticing the growth in e-commerce and online activities, have taken to committing card-not-present and online fraud – fraud that’s carried out online, through social networks and more. The increasing number of data breaches may have also contributed to the rise in fraud. All this, according to some, has led to a surge in fraudulent activity through online means. Unfortunately, online fraud is something that chip cards can’t prevent at this time, as cardholders opt to type their credit card information into online forms to complete transactions.
Will chip cards prevent card shimming?
While EMV cards may not be affected by card skimmers, a relatively new technique akin to skimming, referred to as “shimming,” can target chip card users in a similar way. To engage in shimming, fraudsters insert a shim (i.e., a thin device that has flash storage) into the chip card reader of an ATM or POS system, sometimes by inserting a special card into a payment terminal. The shim then collects your card’s information when you dip it into the terminal. Once it’s collected, the card’s information can then be cloned onto a magnetic stripe card. The resulting product? A magnetic stripe card that can be used to make unauthorized purchases under your name, such as unauthorized buys from online stores.
Some merchants don’t have chip card readers
While there are a number of incentives for retailers to switch to chip card readers, including the October 2015 liability shift date and the doing away of card signature verification, some merchants haven’t made the switch. For example, due to challenges related to the fuel segment’s “complicated infrastructure” and “specialized technology,” Visa has delayed the chip activation date for U.S. domestic automated fuel dispensers to Oct. 1, 2020. Because not all POS systems read chip cards at this time, chip cards may not be able to protect you when you’re faced with the prospect of paying through a non-EMV-enabled payment terminal.
What can you do to better protect yourself?
It may not be possible to completely protect yourself from payment card fraud, but there’s a silver lining: there are some steps you can take to better prevent fraud and mitigate its consequences. For example, if you want to buy something online, it’s beneficial to find out if the online store’s website is secure before paying up. It’s also a good idea to select strong passwords for your accounts and to frequently monitor your balances and statements, checking to see if there are mistakes or signs of fraudulent activity. Additionally, if you are forced to use your magnetic stripe, opt to pay with a credit card over a debit card, as the former offers more fraud protection than the latter.
Now that you know more about why chip cards can’t completely prevent fraud, learn more about what you can do to protect your financial health and personal identity. To start, take a look at our identity theft protection blog.
The bottom line
Having an EMV-equipped card reduces the likelihood that your credit card data will be stolen. And as EMV card readers are primarily used around the world, Americans traveling abroad are sometimes unable to complete transactions using cards without a smart chip. If you are planning on traveling outside of the United States, you should always have at least one EMV-enabled credit card with you.
Please Note: Information about the Discover it® Cash Back have been collected independently by TheSimpleDollar.com. The issuer did not provide the details, nor is it responsible for their accuracy.