How Does the Chip in My Credit Card Work?

Chip card technology has become the standard at merchants throughout the United States -- and the world -- supplementing or replacing the magnetic stripe readers that have been used for decades. Here's a rundown of how chip-enabled cards make your point-of-sale transactions safer, as well as why you still need to take precautions to safeguard your personal information.

The key problem with magnetic stripes on credit cards is that they contain all of the cardholder information that would be necessary to make a purchase, or to duplicate the card. With the rapid advances in technology over the past decade or so, magnetic stripe data has become significantly easier for thieves to steal, after which they can use it to create new cards, or sell it to others.

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Source: Fool.com