Chip-And-Signature Card

A chip-and-signature card uses a data-enabled microchip and requires consumers to provide a signature to complete transactions. A chip-and-signature card is a step up in security from the traditional magnetic stripe card because of the technology the microchip provides. Instead of embedding static data in magnetic particles in the stripe, the microchip allows for a unique, encrypted digital signature that can only be used for a single transaction. 

Chip-and-signature cards use EMV technology. Short for Europay, Mastercard and Visa, the companies that spearheaded the microchip initiative, EMV is a security standard for storing account information on credit cards. The old magnetic stripe credit cards have holes from a security standpoint; they can be copied, lost or stolen, making fraudulent activity relatively easy. By contrast, the microchip in chip-and-signature cards generates a unique transaction code for each purchase. The chip card provides better protection against credit card fraud than the magnetic stripe because fake credit card readers are not able to copy the account data embedded in the microchip.

The same size and shape as magnetic stripe credit cards, chip-and-signature cards are similar in appearance. They are printed with the cardholder’s name, the issuing credit card company’s name, the credit card number and expiration date. The embedded microchip measures about 0.5 inches per side. 

For their part, merchants need specialized equipment to read microchips. Cards must be inserted into a chip reader, similar to how a debit card is inserted into an ATM. Some chip-and-signature cards also use near-field communication technology that allows cards to be read when they are tapped against a terminal scanner. Implementation is ongoing, so chip-and-signature cards in the U.S. will continue to have magnetic stripes until the card system completes the transition to the new technology.

Chip-and-signature and chip-and-PIN cards have different card verification modes. Card verification modes can be described as the process used to insure that the actual account holder is using the card and making the purchase, and not a thief. The main difference between the two cards is that instead of a signature to complete a transaction, chip-and-PIN cards require the cardholder to enter a personal identification number, which adds an additional layer of security to combat fraud than a chip-and-signature card. Anyone could forge a signature at a point-of-sale, and most cashiers do not confirm whether the digital signature matches the account holder's signature on the back of the card. Conversely, duplicating a PIN is much more difficult and something the consumer has additional control over, for instance, consumers are able to change their PIN.