Reviewed by Sep 30, 2020| Updated on
A chip-and-signature card allows customers to provide a signature to complete transactions. Thanks to the technology offered by the microchip, a chip-and-signature card is a step up in protection from the conventional magnetic stripe card. Instead of embedding static data into the stripe of magnetic particles, the microchip allows for a special, encrypted digital signature that can only be used for one transaction.
Chip-and-signature cards work on EMV technology. EMV is a security standard for storing credit card account information. From a security standpoint, the old magnetic stripe credit cards have holes; they can be copied when lost or stolen, making fraudulent activity relatively simple.
In comparison, the microchip in chip-and-signature cards creates a specific transaction code for every purchase. The chip-enabled card provides better protection against credit card fraud than the magnetic strip since fake credit card readers cannot copy the account data embedded in the microchip.
For appearance, chip-and-signature cards look similar in size and form as magnetic stripe credit cards. They are printed with the name of the cardholder, the name of the issuing credit card company, the credit card number, and the date of expiration. The embedded microchip measures approximately 0.5 inches per side.
Traders need a specific device to read microchips. The card must be inserted into a chip reader, similar to how it fits a debit card into an ATM. Some chip-and-signature cards also use near-field communication technology which enables cards to be read when tapped against a terminal scanner.
Chip-and-signature and chip-and-PIN cards provide various modes of card authentication. Card authentication modes can be defined as the mechanism used to ensure that the actual account holder is using the card for the transaction, rather than a thief.
The major distinction between the two cards is that chip-and-PIN cards allow the cardholder to enter a personal identification number versus the chip-and-signature card uses just a signature to complete a transaction. The former technique provides an extra layer of security to prevent fraud as compared to a chip-and-signature card.