What’s the difference between the credit card magnetic strip and the new chip?
The magnetic strip contains the exact information used to identify the card (see types of data below). The chip holds a piece of information that it doesn’t share, but that it can use to prove it has that information.
Thus, a magnetic stripe is dumb and can be copied, but since the chip doesn’t give out its secret, a vendor can’t simply copy it when you use it.
The chipped cards will be safer to use than the traditional credit, charge and debit cards that have only the familiar magnetic stripe along the back.
A magnetic stripe says “I’m credit card ABC.” when the point of sale asks the number. With a chip the point of sale says “what is your response to this random value?” and the chip gives a response that the point of sale can validate, but since the next point of sale will use a different random value, the response is useless to a thief
However, the new payment cards are not as safe as they could be. Chip cards are still vulnerable to online/card-not-present fraud.
Some of the data stored on your magnetic strip:
- Primary account number(PAN) — up to 19 characters. Usually, but not always, matches the credit card number printed on the front of the card.
- Name— 2 to 26 characters
- Expiration date— four characters in the form YYMM.
- Service code— three characters
Service code values common in financial cards:
First digit
1: International interchange OK
2: International interchange, use IC (chip)where feasible
5: National interchange only except under bilateral agreement
6: National interchange only except under bilateral agreement, use IC (chip) where feasible
7: No interchange except under bilateral agreement (closed loop)
9: Test
Second digit
0: Normal
2: Contact issuer via online means
4: Contact issuer via online means except under bilateral agreement
Third digit
0: No restrictions, PIN required
1: No restrictions
2: Goods and services only (no cash)
3: ATM only, PIN required
4: Cash only
5: Goods and services only (no cash), PIN required
6: No restrictions, use PIN where feasible
7: Goods and services only (no cash), use PIN where feasible
- Discretionary data— may include Pin Verification Key Indicator (PVKI, 1 character), PIN Verification Value (PVV, 4 characters), Card Verification Value or Card Verification Code (CVV or CVC, 3 characters)