How Do Chips Make Credit Cards More Secure?

♩♩Intro♩♩ If you’re in the US, you’ve probably heard
grumbling about new credit cards with microchips — and the slow, loud machines we have to
use with them. And if you’re in Europe or Canada, you’ve
been using chip cards for almost a decade, and you’re wondering what the fuss is about. But it’s about time we’re switching, because
old cards were really easy for criminals to fake. And now, it’s next to impossible. At least… offline. The purpose of a debit or credit card is simple:
You’re promising someone that they’ll be paid what you owe them. And some of the card’s information, like
the card number, is its way of saying who you are and where to get the money from. Now, you don’t want someone to be able to
steal your card number, wander into the local Costco, and buy thousands of dollars of teriyaki
flavored beef jerky with it, do you? So, for security, cards also have ways to
verify that they’re really the card linked with that number. Older cards use numbers hidden in a static
magnetic pattern on the back to prove their identity. But it was pretty easy for criminals to steal
that pattern when you swiped your card to buy something, copy it onto another card,
and pretend to be you. So chip cards, also known as EMV cards because
of the companies that created them, have a different way of using numbers to prove their
identity. They use encryption. Their microchips are small circuits that start
working when they’re put in a terminal, like the machines at the grocery store. In the terminal, the chip generates a number
called a cryptogram by combining information from the terminal with its own data. To the terminal — and to anyone who might
be trying to steal your card details — the number looks completely random. And since it’s partially based on information
from the terminal, the number is different every time you use your card. So criminals can’t just copy the number
and use it, like the magnetic stripe pattern. Depending on the setup at the store, that
number might get sent to your bank so that they can tell the terminal if your chip really
generated it. Or, sometimes, the terminal itself can verify
that. Now, in a short YouTube video, we can’t
get into all the math and cryptography behind how your bank gets information from this seemingly-random
number when no one else can. If you’re curious, the last few links in
the description can get you started. The super-condensed version is that these
numbers are easy to generate or verify if you have exactly the right information. And they’re essentially impossible to fake
if you don’t, like if you’re a beef jerky loving criminal. Your chip has what it needs to generate the
numbers. And the bank or terminal has different information
that they need to undo what the chip did, and make sure the data matches the chip and
the card. One place chips don’t help is online shopping,
since you only type in static information on the card, like your name and the number. But they’re designed to stop in-person fraud,
which is exactly what they good at. Thanks for watching this episode of SciShow! If you want to learn about a different way
cryptography is used with currency, check out our video that explains how Bitcoin works. ♩♩Outro♩♩

  1. The US is only just using this? I remember watching Friends episodes when I was younger where they talked about using someone else's credit card numbers and thought it was weird and insecure that was (I thought this as a child). How have you guys ONLY JUST switched to chip and pin?

  2. ok,  then explain how someone was able to steal my chipped debit card number and go shopping the 4 different states in 3 hours without my bank doing anything about it?  I never had that issues with my non-chipped cards

  3. Not really. It just means instead of buying a strip copier for $50 bucks on eBay they're buying a chip copier for $100.

  4. Notice how he uses a white burglar heaven for bid he uses a black one then all hell breaks loose with political correctness because we all know whites commit more crimes than blacked

  5. That's all correct except for the fact that the encryption key used on EMV cards was cracked in under 3 months making them even less secure than mag strip cards now.

  6. I only know RSA Cryptography. Is the method used for the chips similar? Could you crack the chip's code if you repeatedly used a test terminal?

  7. "What does the chip on my credit card do?" Break and give an "insufficient funds" decline, which of course you won't know until you're trying to get $150 in groceries, and you know damn well there's money in the account. Embarrassing and frustrating.

  8. We've has chips for so long in Canada. Most places have machines that don't even need inserted chips anymore, you can just tap your card. There's a spending limit on the tap, obviously, and banks monitor them very closely. If there's any abnormal purchases, they'll freeze your card right away, and sometimes even call you to be like "Hey, did you make this purchase?" I set my tap limit really low so that I can do things like buy lunch quickly, but I need the chip and PIN for most purchases with my credit card. A lot more secure than swiping and signing, that's for sure. I recently bought an iPhone so I use Apple Pay most of the time now. My debit card doesn't leave my wallet and my fingerprint verifies the purchase.

  9. Can you do a follow-up on "3D secure" which is meant to help fraud online ?
    It seems not all banks support this; as a bonus explain why.

  10. So explain why I can use my card with a chip at places that don’t require me to use a pin or signature or ID. I just insert my card and bam all done. I could be anyone using that card

  11. Americans, please answer: What, exactly, is SLOW about waving your card above a handset? Chip readers are faster than swiping, not slower.

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