Chip-And-PIN vs. Chip-And-Signature Cards Explained

EMV chip cards are now standard in the US, but cardholder verification can still vary by card and transaction. Some purchases require a PIN, while others require no verification or, less commonly, a signature.

So, what is the difference between chip-and-PIN and chip-and-signature, and how does each method affect merchants and customers?

How Do Magstripe & Chip Cards Work?

A magnetic stripe stores static card data. When the card is swiped, the terminal reads that data and sends it for authorization. Because the information does not change from one transaction to the next, stolen magstripe data can be copied and used to create counterfeit cards.

EMV chip cards provide stronger protection against counterfeit fraud. When a chip card is inserted or tapped, it generates a unique security code for that transaction. Reusing stolen transaction data is therefore much more difficult.

The card and terminal also determine whether cardholder verification is required. Depending on the card, transaction, and issuer, this may involve a PIN, verification through a mobile device, a signature, or no verification at all.

Signatures are now much less common in the US. Visa stopped requiring EMV-enabled merchants to collect and verify signatures in 2018, although merchants may still choose to request one in some situations.

Is Chip-And-Signature Less Secure?

EMV chip cards make counterfeit-card fraud more difficult by generating unique transaction data. However, the cardholder verification method affects protection when a legitimate card is lost or stolen.

A PIN provides an additional verification step because the person using the card must know the correct number. Signature verification offers less protection, especially when signatures are not checked. Many US chip transactions now require neither a PIN nor a signature, particularly for lower-value or contactless purchases.

Even without a PIN, the chip still provides stronger counterfeit-fraud protection than a magnetic stripe. It simply offers less protection against unauthorized use of a stolen physical card.

How Does This Affect Business Owners?

The EMV liability shift generally places responsibility for counterfeit-card fraud on the party that failed to use chip technology. If a customer presents a chip card and the merchant processes it using a magnetic-stripe reader instead of an EMV-enabled terminal, the merchant may be liable for a resulting counterfeit-fraud chargeback.

Using an EMV reader does not protect a business from every chargeback or fraudulent transaction. Merchants should follow the card reader’s prompts, avoid bypassing chip acceptance when possible, obtain authorization, and follow their processor’s procedures for fallback transactions.

PIN, signature, and no-verification transactions may each be valid depending on the card, terminal, issuer, and payment network. Merchants do not need to choose the verification method themselves; the card and terminal determine the available method during the transaction.

What About Contactless & Mobile Wallet Payments?

Contactless payments use NFC technology to let customers tap a card, phone, or smartwatch near a compatible terminal. Mobile wallets such as Apple Pay and Google Wallet store a digital payment credential rather than sending the physical card number directly with every purchase.

Customers typically authorize mobile wallet payments using Face ID, a fingerprint, a device passcode, or another supported verification method. Apple Pay, for example, creates an encrypted payment token and uses device authentication to authorize the transaction.

For business owners, the main takeaway is simple: choose an EMV reader that supports both chip and contactless payments. NFC is no longer an emerging technology; it is a standard payment option supported by contactless cards and widely used mobile wallets.

Start your search with our picks for the best credit card readers for small businesses.