How do those new credit cards work?

Contactless and chip cards

Did you get a replacement credit card in the mail in the past few years? Credit card companies have slowly been embracing technologies that have been common in Europe for a number of years. Old style credit cards relied on the magnetic stripe on the back of the card to carry the information required for you to complete a transaction. The problem is the data on the stripe could be duplicated and used by a “bad guy.” The new cards, if used as intended, make that particular move impossible and I’ll explain that later in this article.

The new cards come with one (or both) of two new technologies. “Chip” cards have a microchip embedded in them, “contactless” or “tap and pay” credit cards have wavy lines that look a bit like a WiFi symbol on them (see for some pictures).

Both of these cards use the same type of technology used by Apple Pay and Google Pay - they generate a new code for each transaction so even if the transaction is “sniffed” (or recorded) by a disreputable person, it does them no good because the code used for the current transaction can never be used again. Note that the new cards may still have the old magnetic stripe on the back. Do not use it unless the merchant doesn’t accept the new technology! Using the stripe exposes you to the same type of thievery that the new technology is intended to stop.

While the underlying technology is the same for both cards, the way that the card and the payment terminal interact is different. A “chip” card actually does have a microchip embedded in them and it’s activated when inserted into a compatible payment terminal. Note that I said “inserted” - this is different from swiping. Swiping uses your magnetic stripe. Inserting activates the microchip and uses the new technology.

Contactless credit cards are also known as “tap and pay,” “tap and go,” or EMV (which stands for Europay, Mastercard and Visa - the companies that originally adopted the standard), They have an NFC (Near Field Communication) chip in them that activates when put near a reader (the tap and pay terminal which you’re using to pay for your purchase, the merchant’s terminal). The reader emits an electromagnetic signal that activates the NFC chip in the credit card which then generates a unique token which, along with some other information, is sent to the reader (the merchant’s terminal). That information is then sent to the issuing bank for approval (which is why many merchants can’t process credit card transactions when their Internet is down). All this happens in less than the blink of an eye and your transaction is approved! You don’t have to worry about “skimming" or a nefarious individual sniffing your transaction - the code generated is only good for that one single transaction and can’t be used again. This also means that you don’t have to protect your card with those RFID or NFC blockers because whatever the bad guys might pick up does them no good. the article at debunks some of the myths around tap and pay cards and talk a bit about the security they use to keep your transactions safe.

What is NFC technology? It’s a short range wireless standard (less than 4 inches) that uses an active reader (one that’s powered) and a passive (i.e. unpowered) tag. In a nutshell the active reader emits a radio signal that’s picked up by an antenna in the tag. That signal is sufficient to provide enough power so that the tag can do whatever processing is necessary (e.g. your tap and pay card is really a tag) and then transmit its data back to the reader. Your phone likely has NFC. If you can use Apple Pay or Google Pay then it has an NFC reader built in. And if that’s the case, you can buy some NFC tags and “program” them to do all sorts of cool things.

If you’re an Apple user, here’s a good introductory article on programming and using NFC tags If you’re an Android user, check out for similar information.

There are all sorts of interesting things you can do with NFC tags. You can put a tag in your car and touch it with your phone to turn on Bluetooth, turn off WiFi, and mute your phone’s ringer. If you want to share your WiFi with guests but don’t want to give them your WiFi’s password, you can use an NFC tag. You can put your contact information or a website URL on an NFC tag and give that to your clients or friends. If you want to find some other interesting uses, here are a few more

That's all for this week's column. I hope this helps you understand the new technologies offered by your new credit card!. Don't hesitate to write to me if you have questions!

As always, my intent with these newsletters is to spark your curiosity, give you enough information to get started, and arm you with the necessary keywords (or buzzwords) so you'll understand the basics and are equipped to search for more detailed information.

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