Question: All of my credit cards now have the chip technology. I read that it is easy to steal the identity from these cards. Is that true and how do I protect them?

Answer: The new cards actually provide better security.

The magnetic strip on your credit card stores a lot of personal information and identity thieves can easily capture and copy the information from these magnetic strips. The new chip technology provides better security than the old magnetic strip cards because the technology provides less card exposure, better data encryption and new authentication codes.

In the past seven years credit card fraud has doubled in the US. It is the hope of the card issuers to greatly reduce fraud with the use of the new chip technology.

The chip-enabled cards do a better job of protecting and limiting the card exposure because the merchant and card processors do not store the card data in the merchant’s computer systems like the magnetic-strip cards - you probably remember the security breaches at Target, Home Depot, Best Buy, etc.

When you use the chip card the data flows between the card chip and the issuing financial institution to verify the card’s legitimacy and create the unique transaction data. This process isn’t as quick as a magnetic-strip swipe but is a big step in providing better security and safety.

Each time a chip card is used for payment, the card is inserted in the payment terminal, the chip creates a new unique transaction code and that code cannot be used again. The card and the card number are never released to the merchant adding another layer of security.

The embedded chips also have the credit card information but with a new level of encryption. When you swipe a chip card the terminal verifies the card is authentic by checking the chip. The chip makes the cards significantly harder to clone and, even if the thieves get all of the information from a card’s magnetic strip, without the chip actually being present the card data is useless.

As of today there hasn’t been a major chip credit card breach. Of course, if a thief physically steals your card they can still use it until you report it as stolen or lost. Also, if you use your credit card over the internet you do not have the protection of the new technology as you provide the card information and the chip cannot issue the unique authorization codes.

However, human nature tells us that it is a safe bet data thieves will start working on the less secure angle of Internet purchases and work on ways to beat the technology improvements.

Regardless of how smart our technology becomes, it still is up to us - the consumer - to keep a close eye on our credit card statements and credit reports to protect our identities and our credit.

So take care in protecting your credit cards and how you use them. In particular, only use one card for internet purchases.

Need answers to your financial questions? Email former Family Service Association of Sheboygan executive director Ken King at

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