MoneyWisdom Blog

Is your chip card sending a radio signal?

Posted by Bill Burpeau on Feb 10, 2016 8:35:51 AM


Ten years ago, an IBM commercial ran of a young man wearing a trench coat, stuffing items in his coat as he walked through a grocery store.  He looked around suspiciously and began moving toward the door.  A security guard, watching his every move, followed him to the door.  As the two came face to face in the store vestibule, the security guard reached down, grabbed a piece of paper and said, "Excuse me sir. You forgot your receipt!"

Everything in the young man's coat had been scanned and paid for electronically. IBM was pointing to the future of shopping. And while the underlying radio-frequency identification (RFID) technology that will make it possible has been around for a while, it has not been embraced by consumers or retailers. In fact, the number of financial institutions issuing these “contactless” cards has been diminishing. 

Where the industry has been heading is the issuance of chip cards. The chips need to be in contact with the merchant’s payment terminal to process the transaction and are known as “contact” cards. There is a dual format chip that supports both contact and contactless payments, but most financial institutions including Hanscom FCU have not adopted it for use in their cards. 

There are two types of smart cards in use today: 

Contactless:  Uses RFID or near field communication (NFC) to make secure payments. These cards need only be in the proximity of a card reader to make a payment. These cards are falling out of favor and instead consumers are utilizing mobile devices with Apple Pay or Android pay in place of using a physical card. 

Contact:  Requires physical contact between the card and the reader in order to transfer data and make a secure payment. Most of these cards are single format and do not transmit information via RFID. 

Since chip cards issued by Hanscom FCU are contact cards,  they must be inserted into a terminal and remain there through the entire transaction. Using your PIN, if prompted, helps make the payment even more secure. Our cards don't contain RFID chips and can't be "read" or scanned by someone with an RFID reader. 

Rest easy, the future will be here soon enough. 

Not sure about how to use your new chip card?  Check out the video below for a quick demonstration.

Topics: Credit Cards

Bill_BurpeauBill Burpeau is the Multimedia Manager for Hanscom FCU.  He is an author and teaches personal financial management to high school students. His favorite quote is from John Maxwell – “If you don’t tell your money what to do, you’ll wind up wondering where it all went.”
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