Microchips in payment cards improve security by generating unique transaction codes

Magnetic strips store unchanging data that is easily cloned, but microchips act as miniature computers that encrypt sensitive data. They also resist fraud by creating data unique to each transaction, preventing duplication.

Why there are microchips in credit cards

Credit cards have evolved significantly since their invention in 1950, but security lagged in the US for years. Despite handling only a quarter of global transactions, the US once accounted for half of all credit card fraud. The 2013 Target data breach helped push the adoption of chip cards, reducing fraud but shifting risks to online scams.

Contactless credit cards descend from a batteryless Cold War listening device

The same physics that let Soviet spies eavesdrop on the US ambassador in 1945 underlie contactless payment methods today. The device is a passive chip powered wirelessly by incoming radio waves.

Old credit cards can be made into guitar picks, phone stands and more

Experts recommend always cutting through the chip and the card number when disposing of expired credit cards, as the magnetic strip, the chip, and the card number all contain information that thieves might be interested in.

Algorithms built to detect credit card fraud can deny charges if they perceive the attempted purchase is unfamiliar or unusual based on historical data, even when a person has enough credit to make the purchase.

Watch a video that visualizes what really happens inside a credit card network when you make a purchase.

Gas stations top the list of riskiest places to use a debit card

Unlike credit cards, debit cards withdraw funds directly from your checking account, and federal laws provide fewer consumer protections against debit fraud. Gas station "skimmers" and long periods of separation from the card at restaurants are some of the more vulnerable spots for use.

Only 14% of transactions are in cash, as of 2025

Credit (35%) and debit (30%) cards have long eclipsed cash as the primary method of payment in the US. It is a primary backup, however, with 90% of customers intending to use cash to pay or store value and 80% carrying cash.

Digital passports allow identity verification to be digitized

By scanning the security chip on the back of passports and capturing images or video of a person, apps like Google Wallet and Apple Wallet create a digital version of the document. Some states have also developed their own apps for digital driver's licenses.

Charge cards are different from credit cards

Unlike credit cards, charge cards often don’t have a preset credit limit, but cardholders need to pay off the entire balance every month.

See an original Diner’s Club charge card

Before credit cards, there were charge cards from companies like Diner’s Club. While credit cards allow cardholders to carry a balance from month to month (potentially accruing interest), charge cards like Diner’s Club cards had to be paid off right away.

Merchants have to pay credit card transaction fees each time a card is swiped

Credit card networks such as Visa, Mastercard, and American Express must calculate fees for not only the customer, but also the merchant in every transaction.

Listen to a podcast episode from 1440's editor in chief that explains how a credit card transaction works behind the scenes.

When you buy even something as small as a $5 latte, a global relay between banks and networks like Visa and Mastercard is triggered. It all started with a 1958 campaign from Bank of America that jump-started the credit card revolution.

Customers wrote just one check a year in 2024, on average

Major retailers like Target have stopped accepting checks in recent years as real-time payment systems are increasingly being implemented across the US. This shift is considered an improvement in safety—as checks are vulnerable to fraud—but can lead to some exclusion for those without access to digital devices.

Card issuers are financial institutions that open credit to customers, while card networks facilitate purchases between merchants and customers

Card issuers give customers credit cards, set rate limits, and collect payments. Card networks, on the other hand, dictate where credit cards can actually be used by managing relationships between the network and merchants. These networks make money on interchange fees, which merchants pay to accept a specific card network at their stores.

Visualize how passkeys, which rely on asymmetric cryptography to authenticate users, work

After using biometrics or a PIN to access the private key stored on a device, it is combined with a random number generated by the site to produce a cryptographic signature. This signature is verified using the site's public key, allowing a user to log in without entering a password. This reduces the risk of fraudulent messages—phishing attacks—and data breaches.

Affirm's COO recently said that the company believes the credit card is 'going the way of the VHS tape'

Some people use buy now, pay later apps as an alternative to credit cards. BNPL services have a lower barrier to entry than credit cards—many frequent BNPL users have low credit scores.

Credit card companies make money through interest, annual fees, and more

They also profit from interchange fees, the fee the retailer has to pay the credit card network in order to facilitate a transaction. The fee is typically between 1% and 3% of the transaction amount.

Financial institutions check for lots of things before authorizing a purchase

Before authorizing a purchase, card issuers consider whether or not the cardholder has a high enough available credit limit to make the purchase, where the purchase is being made in order to reduce fraud, and more.

Visa, the first credit card network, still dominates competitors with a roughly 52% market share by purchase volume.

Among the major credit card companies in the US, Mastercard had about 25% of the market share in 2025. American Express had roughly 20%, and Discover had the smallest market share of about 4%.

It's unlikely that we will ever live in a completely cashless world

Although countries like China are moving toward a cashless system, many other countries still rely on physical money for everyday transactions. This article dives into the future of currency and includes a map of the percentage of adults who do cashless transactions around the world.

An explanation of hard credit checks vs. soft credit checks

Some buy now, pay later services do a soft credit check rather than a hard credit check, like credit card companies would do when someone applies for a card. While hard credit checks can impact your credit score, soft pulls typically do not.

Passkeys, a new authentication method, aim to replace traditional passwords

Passkeys use cryptography keys to secure logins without passwords, resisting phishing and risks from data breaches. The FIDO Alliance developed passkeys as a combination of public and private keys for authentication.

Apple Pay is activated on more than 78% of US iPhones

As a result, some banks worry they could be losing ground to the tech company. As consumers continue to use Apple Pay instead of pulling out their physical debit card to pay for everyday items, some banks are fighting back in the digital wallet war.

Credit monitoring services may oversell the benefits of dark web monitoring

Currently, technology exists to scrape and download data from webpages, which can then be analyzed to identify a user's information. However, scrapers cannot access or remove personal data from dark websites because they are often protected by paywalls, rendering monitoring ineffective beyond reporting publicly available data breaches.

AI could be increasing the opportunities for financial fraud

Systems that can reproduce near perfect counterfeits of legitimate financial documents are increasingly prevalent and sophisticated. The international Association of Certified Fraud Examiners estimate organizations lose about 5% of revenue to fraud each year.

Some coin denominations have ridges on their sides in part to prevent counterfeiting.

Fraud and identity theft are among the most common dark web-related crimes.

Every printed bill has its own unique serial number

In the US, each bill also has its own plate number, series year, Treasury seal, and more. Each design helps track money and combat counterfeiting.

The US developed a coin circulation problem in 2020

As people reduced the frequency with which they paid for things in cash and change during the COVID-19 pandemic, opting for tap-to-pay systems or online shopping instead, the number of coins in circulation decreased. Those who did make cash purchases were more likely to keep their change at home rather than use it on a subsequent purchase.

A company called Bluprynt is combating counterfeit cryptocurrency

While some cryptocurrency advocates might argue that it's more difficult to counterfeit crypto than physical currency, some estimate that fake cryptocurrencies are losing crypto users at least $1.6B each year.

In recent years, NIST has suggested that passwords no longer be created using a mix of symbols, numbers, and capital and lowercase letters, as was once recommended.

Privacy concerns in the credit scoring system

Because credit scores use a lot of personal information (such as whether or not someone makes credit card payments on time), some worry their privacy is being compromised in the data collection process.

China is making a deliberate push towards becoming a cashless society, making digital payment services like Tencent's WeBank even more valuable.

Who actually pays for your credit card rewards?

In 2018, 92% of all credit card spending was made on a rewards card, which seems like a good deal to many who apply for rewards cards offering discounted flights, points, and more. But in actuality, the customers are often the ones who end up paying for the rewards in the grand scheme of things.

Hackers once used 'Fortnite' to clean money from stolen credit cards

Hackers using stolen credit cards would create "Fortnite" accounts and purchase V-bucks, the in-game currency. The hackers would then sell the entire "Fortnite" account on sites like eBay. For instance, an account with $100 worth of stolen V-bucks might sell $25 on eBay.