What Are the Advantages and Disadvantages of Chip Readers and PIN Pads?

According to Bankrate, chip and PIN systems offer more security for banks and retailers and make it harder to forge or steal credit cards while shifting the liability for misuse onto the consumer. In addition, chip and PIN systems force consumers to memorize an additional code to use their credit cards instead of simply being able to swipe and sign to purchase goods.

Chip and PIN systems use a small microchip embedded in the credit card to store data. When you swipe a chipped card, the system asks you for your PIN number then transmits that to the microchip in the card. If the microchip reports a match, the system approves your purchase. This means that if someone steals your credit card, he would have to also gain access to your PIN to use the funds instead of simply being able to swipe and sign. Since many stores use automated signature terminals, this makes it easy for a thief to use a card without being caught due to a signature mismatch. While the chip and PIN system offers better security, it does put the responsibility of protecting the PIN onto the consumer because a user would have to give away a PIN for a thief to make fraudulent charges.