Will chip-based credit cards really work?

Credit cards can dole out gains to you and also give you pain. On the one hand, they make life really easy. But they can make life really difficult, thanks to the ever increasing number of frauds. To tackle this, the Reserve Bank of India (RBI) has asked banks to issue a new type of credit card to all new customers. In fact, even the existing cards will be replaced. In the new type of card instead of a magnetic strip on the reverse of the card, there will be a chip in front of the card, notes the Business Standard today.

What makes this card more secure is that your card and personal data will be stored in an encrypted format on the chip which looks like a SIM card in front of the card and not on the magnetic strip on the reverse of the card.Stealing data from a chip card become more difficult for the fraudster. Moreover, wherever you use the chip-based card at a card reading machine (EDC machine) or a point of sale (PoS) terminal, you will have to punch in a four-digit PIN.

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Banks will have to convert all credit card customers on the new system. The best part is that since the regulator has made it mandatory for banks to issue chip-based cards, most banks will not charge you a fee for the same. Since chip-based cards are more expensive than the magnetic strip-based cards, some banks may pass a nominal fee to the customers. A chip-based card is not vulnerable to hacking and skimming frauds. While, as of now, banks are offering chip-based cards with a signature facility to authenticate the transaction. By December they will offer chip-based cards with PIN facility as well. Read the entire Business Standard report here.

To know more about chip-based credit cards, do read this Firstpost story as well.