By Julie Myhre, NextAdvisor.com
If you have a debit or credit card, you've likely noticed that you've recently received a new version of the card that includes a chip. As such, you're probably wondering what this chip is and why your cards need it. To help you ease into chip technology, we've broken down everything you need to know.
What are chip cards?
On the other hand, when you pay with a chip card, that transaction is not only strongly encrypted, but also assigned a one-time code that is no longer valid after the payment is received (unless you need to make a return). Because of this, chip card numbers are a lot harder to steal using point-of-sale (POS) skimmers or any other tactic, as the information on the chip is constantly changing. Since this is the case, it also means that if your payment information is leaked in a data breach, the hacker is less likely to use your information for fraudulent transactions because the information they'll have is no longer valid. It should be noted that while these chip cards can help reduce card fraud, they cannot completely eliminate it.
How do I use a chip card?
Since the chip sits on the upper-middle left side of the card, the swipe you're used to won't work for EMV readers. Instead, chip cards are inserted, or "dipped" as it's commonly known, into the card reader (see image above). While it's in there, the chip and reader communicate to create the one-time transaction code, and then you'll have to step in to complete the transaction. There are two ways you'll complete the transaction and confirm the purchase -- sign a receipt or enter a PIN. The type required for your card depends on your bank or card issuer.
Chip-and-signature: From a consumer standpoint, the purchase process of a chip-and-signature card is very similar to how a magnetic stripe is processed; the POS machine reads the card and you sign a receipt to complete the transaction.
Chip-and-PIN: Similarly, a chip-and-PIN transaction is comparable to paying with a debit card; the POS machine reads the card and you enter a PIN to complete the transaction.
Although the process may sound a little complicated, it is pretty simple and takes about the same amount of time as a magnetic stripe transaction would. Until you get the hang of paying with your chip card, patience is the best practice, as if you remove the card from the reader too quickly, you will have to redo the transaction.
What can I do to prepare for the switch?
What should I do if my bank hasn't updated yet?
Best for cash back: Blue Cash Preferred Card from American Express
If you'd prefer to earn cash back rewards, the Blue Cash Preferred Card from American Express (a NextAdvisor advertiser) is the best option for you. With this card you'll earn $150 back (in the form of statement credit) after you spend $1,000 in purchases within the first 3 months. You'll also earn 6% at U.S. supermarkets (up to $6,000/year in purchases and then it's 1%), 3% at U.S. gas stations and select U.S. department stores and 1% on all other purchases. As if those rewards aren't enough, Blue Cash Preferred will also give you a 0% intro APR on purchases and balance transfers for 15 months, after which a variable APR applies. If the $75 annual fee isn't something you're willing to pay, you'll want to check out the Blue Cash Everyday Card from American Express, which offers comparable rewards without the annual fee.
Best for balance transfers: Chase Slate
While a balance transfer credit card may not appeal to your for its rewards, or lack thereof, it is one of the easiest ways for you to make the switch from a magnetic stripe card to a chip card, as you can transfer the balance from your old card to the new one. Chase Slate (a NextAdvisor advertiser) makes the balance transfer process even easier by not only providing a 15-month 0% intro APR on balance transfers and purchases (then the standard APR applies), but also offering a $0 intro balance transfer fee for transfers made within the first 60 days. In addition, this card has no annual fee and no penalty APR for late payments. Unlike the other cards on this list, Chase Slate also only requires "good" credit for approval, which also makes it the top option for someone with less-than-perfect credit.
Best for travel: Barclaycard Arrival Plus World Elite Mastercard
With generous travel rewards and chip-and-PIN technology, you can't really go wrong with the Barclaycard Arrival Plus World Elite Mastercard (a NextAdvisor advertiser). To start, this card gives you 40,000 bonus miles -- worth $400 in travel -- when you spend $3,000 on purchases in the first 90 days. Taking the No. 1 spot in our 2015 Travel Rewards Credit Cards Analysis, the Barclaycard Arrival Plus World Elite Mastercard earns 2 miles per dollar spent on all purchases and an additional 5% miles back to use toward your next redemption whenever you exchange earned miles for travel statement credits. Although the card does have a $89 annual fee, it's waived for the first year.
Best for businesses: Ink Cash Business Card
A business credit card is a must for small business owners, and the Ink Cash Business Card (a NextAdvisor advertiser) is the top option. To start, this card gives you a $200 cash back bonus when you spend $3,000 on purchases within the first 3 months of account opening. In addition, you'll earn a series of cash back rewards starting with 5% cash back on the first $25,000 spent in combined purchases at office supply stores and on cellular phone, landline, Internet and cable TV services; 2% cash back on the first $25,000 spent in combined purchases at gas stations and restaurants and an unlimited 1% cash back on all other card purchases. To sweeten the deal, the Ink Cash Business Card offers a 12-month 0% intro APR on purchases and balance transfers and has no annual fee. Visit our guide to business credit cards to learn more about the top options.
Best for students: Discover it for Students
If you're a student looking for a chip card, Discover it for Students (a NextAdvisor advertiser) is your best bet. Not only does this card earn you 5% cash back in categories that change each quarter -- such as gas, restaurants and Amazon.com -- and 1% cash back on all other purchases, it also gives you $20 cash back each school year your GPA is a 3.0 or higher. In addition, this card has a 0% intro APR on purchases for 6 months (then the standard variable APR applies) and no annual fee.
Want to see some of the other top chip credit card options? Read our credit card reviews to see which is the best fit for you.
This post was originally appeared on NextAdvisor.com.
Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author's alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This content was accurate at the time of this post, but card terms and conditions may change at any time. NextAdvisor.com may be compensated through the credit card issuer Affiliate Program.