Credit card chip technology, also called the Europay, MasterCard and Visa standard, offers increased security to credit card transactions compared to the old standard of magnetic strips. The chip creates a unique code that is only useful for a single transaction, making it harder to duplicate a credit card.
With a magnetic strip credit card, the owner swipes the card through a special device that reads the static information, such as the card number, stored on the card. This machine then sends that number through its system to alert the credit card company of the transaction and credit or charge the account as necessary. The major security risk with this system is that the information stored on the magnetic strip never changes, so anyone who accesses that information has access to the card's entire line of credit. This makes duplicating a credit card for fraudulent purposes relatively easy.
With the Europay, MasterCard and Visa standard, the information is stored on a computer chip. This chip creates a special, single-use code during each transaction that authorizes the change to the credit balance. If an individual obtains this code during a specific transaction, it does not allow him to access the other information related to the line of credit and create a fraudulent copy of the card.