Woman inserting credit card
@SayQueso/Twenty20

You’ve been doing it for years: You swipe your credit card at a point-of-sale terminal to buy groceries or a triple-shot, iced soy latte, and then you sign a paper receipt.

But times are changing, and by now you’ve probably received new cards featuring chip technology. More secure than a swipe-and-sign cards, chip cards help prevent identity theft.

While chip cards are more secure, payments infrastructure in the U.S. is still catching up with this new approach. That means many retailers and restaurants use a hybrid system that may be a bit confusing at first glance.

How the chip works

Chip cards use EMV technology, named after the three companies—Europay, Mastercard and Visa—that set the standard. When you use a chip card, it generates a unique, encrypted code that works only for that transaction. Because the code changes with each use, it is far more difficult to steal and to clone.

In contrast, when you swipe a card with a magnetic stripe, the data is not encrypted and never changes, making it much easier to steal. Not only can thieves use card skimmers to read the card’s data, but hackers can break into the networks of retailers and install malicious software on cash registers to get the personal and financial information that’s stored on magnetic-stripe cards.

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Why your chip card still has a magnetic stripe

Many retailers, banks and credit unions adopted the new EMV technology quickly, because in October 2015 they became liable for fraudulent transactions. Some retailers have been slow to make the transition, however, owing to the cost and hassle of installing new card readers. For this reason, most credit cards in the U.S. still feature both chips and magnetic stripes.

How to use a chip card with a PIN

Instead of swiping your card through a card reader, with a chip card, you insert the end with the chip into the slot at the front of the reader with the chip facing up. If you have a chip-and-signature card, you’ll be required to sign for your purchase either on a paper receipt or on a screen.

With a chip-and-PIN card, you must authenticate the transaction by entering a PIN, just as you would with a debit card. By adding this step, PIN cards stop the fraudulent use of lost or stolen cards at cash registers, making them more secure.

Use Bankrate’s calculator to figure out what it would take to pay off your credit cards.

Chip-and-PIN cards outside the U.S.

While chip-and-signature cards are more common in the U.S., Europe uses a chip-and-PIN verification system. Some European card readers will generate a paper receipt for you to sign, but in some cases, particularly at self-service check-outs including gas and train station kiosks, you may need a card with a PIN. If you plan to travel and don’t have a chip-and-PIN card, it’s a good idea to call your bank to see if it offers one.

Am I safe with a chip-and-PIN?

While chip-and-PIN cards are safer, particularly for point-of-purchase transactions, they are not immune to fraud. So be sure to review your statements regularly, and contact your bank about any transactions you don’t recognize.