The Biggest Question About Smart Chip Credit Cards

There are as many questions about smart chip (or EMV) credit cards as there are the cards themselves.

Some of these questions are easy to answer. For example, yes, chip cards are safer than magnetic stripe cards, due to the following reasons:

  1. They’re harder to counterfeit.
  2. Rather than sending all your card information to the merchant when you make a purchase, the card sends a unique transaction code that, if stolen, would be of no use to hackers. It would be like stealing an expired password.
  3. So-called chip-and-PIN cards, which require you to enter a four digit code like you would at an ATM, take security to even greater heights. Those cards are safer than “chip-and-signature” cards, which require a signature much like the old magnetic stripe cards do, simply because it is easier to forge someone’s signature than to know their PIN.

Other questions are much harder to answer. In fact, the biggest question surrounding chip cards, in my mind, has yet to be satisfactorily answered: Why are most U.S. banks opting to release the less-secure chip-and-signature cards instead of chip-and-PIN cards?

Chip-and-PIN is not perfect. It’s well-documented that it won’t do anything to combat fraudulent credit card purchases online, for example. But much of the world has long since moved on to chip-and-pin cards, as most any seasoned international traveler could probably tell you. Why then is the U.S. still taking just the baby step toward chip-and-signature instead of diving into chip-and-PIN?

Banks will tell you that the last thing American consumers want is another password. They’ve got 100 others that they struggle to keep track of, and they don’t want to have to use one with their credit cards.

Give us a break. What Americans do want is a safer credit card. They’ll handle another PIN just fine.

Banks will also say that chip-and-signature cards make the move to chip cards easier for both merchants and consumers. They’ll already have to get used to “dipping” their card in a slot rather than swiping it. Why make it more confusing by adding a PIN to the process?

Again, give us a break.

The way to make the transition to chip cards less confusing is to do it in a simple, uniform way with as few steps as possible. Chip-and-signature makes that impossible. All it does is drag out the inevitable march toward chip-and-PIN and make things far more confusing and convoluted for all involved than a PIN ever could.

Don’t believe me? Consider this. There are chip-and-signature cards that can also support a PIN, as well as chip-and-PIN cards that you can sign for. There are cards that are chip-and-signature only. There are cards that are chip-and-PIN only. One particular card supports both chip-and-signature and chip-and-PIN, but you have to use it first as a chip-and-signature card in order to activate the PIN code. Try and use it as a chip-and-PIN card first, and it won’t work.

Makes sense, right? Not so much.

Then there’s the biggest reason why I find the move to chip-and-signature so baffling: money. Most experts believe that chip-and-PIN will eventually be adopted in the U.S. the same way it has been in much of the rest of the world. That means that chip-and-signature will eventually go the way of the dodo, after magnetic stripes have done the same.

For many banks, the switch from chip-and-signature to chip-and-PIN will be simple. For cards that support both PINs and signatures, the default preference on the card can be switched remotely, without having to issue a new card. Not so for all cards, though. If a bank issues a card that supports only chip-and-signature – and there are many cards out there like that – the only way to switch that card from signature to PIN is to reissue it.

We don’t have specific data on how many banks are issuing signature-only cards. (Banks typically don’t advertise those details.) However, there’s no doubt that many of them exist, and they’ll likely have to be replaced with PIN cards in the not-too-distant future. It won’t be cheap.

“But,” you might say, “banks are always reissuing cards anyway. Like when a card reaches its expiration date.”

That is true. However, they’re not reissuing the vast majority of their cards in such a short amount of time. Plus, chip cards – whether they support signature or PIN — are far pricier to issue than magnetic stripe cards, and banks haven’t exactly made a secret of the fact that the transition to chip cards has already been incredibly expensive.

So why are banks forcing themselves to do it all again in just a few years? There’s really no good reason – so here’s what banks need to do: stop the presses. Stop making chip-and-signature-only cards now.

Start cranking out chip-and-PIN cards instead. Lots of them. If a bank still has its heart set on allowing signatures as well, fine. Just be sure to have every card default to chip-and-PIN. Doing so will make it easier on consumers, merchants and banks in the long run. It will make cards safer.  And they could potentially save themselves money.

All the signs point to this being the right thing to do, right now. So, banks, what are you waiting for?


Matt Schulz is Senior Industry Analyst at He is also a regular contributor to’s My Money blog. 

Morning Consult