What is a chip ATM card? Why should you use a chip card?

According to the announcement from the State Bank, starting July 1, it will stop issuing magnetic stripe ATM cards and switch to chip-based ATM cards. So what is a chip-based ATM card and why is there this change?

1. What is a chip ATM card?

Magnetic cards have the characteristic that all customer information, card number and especially the important black strip information on the back are displayed on the card face. When withdrawing money at an ATM or making other transactions at a POS machine, the machine will scan the customer's personal information on the black strip.

With such an operating mechanism, it is very possible that all ATM card information can be easily stolen when hackers use a regular magnetic card swiping device.

Chip cards, also known as Chip cards, Smart cards, chip-and-pin cards, chip-and-signature cards, Europay - MasterCard - Visa (EMV) cards, will have a chip on the front of the card that is responsible for encrypting personal information when making transactions at POS machines or ATMs.

Chip card transactions must go through multiple authentication steps from the card receiving device, the payment bank, Mastercard/Visa, and the issuing bank. Each time a transaction is made, the chip embedded in the card will create new data.

2. How is an ATM chip card different from an ATM magnetic card?

ATM magnetic cards and chip cards are fundamentally different from the external interface to the security design on the card.

1. Difference from design interface

ATM magnetic cards will have a black magnetic strip on top of the card. And this black strip will contain the cardholder's information.

ATM chip cards have an electronic chip attached to the front of the card. This chip will contain encrypted information about the cardholder.

2. Different levels of security

Magnetic card customer information is secured in the black line and stored in text form. This makes the information easily decipherable by thieves, who can steal personal information, so the level of security is not high.

Chip cards store customer information encoded in computer binary code. The encryption chip enhances information security and the chip's encryption code is constantly changing.

3. Compare the durability of the 2 types of cards

ATM magnetic cards are prone to scratches on the surface and at the black lines. With ATM chip cards, information can be erased and rewritten many times.

4. Differences in cardholder identification methods

ATM magnetic cards have a simple identification method through a magnetic strip, the cardholder's image printed on the card and the cardholder's signature on the back of the card.

Chip cards are more complex in identifying the cardholder by pin code.

5. Feature to integrate more applications into the card

Chip cards are being researched to integrate more utilities such as savings books, student cards, loans, etc. to help users use them more easily.

As for ATM cards, they cannot be integrated.

6. Cost of using the card

Because the information on the ATM card can only save a certain amount of information, it cannot be erased and new information cannot be recorded, so the bank will need to pay an additional fee to buy a blank card if the customer changes the card.

ATM chip cards can erase information and rewrite it multiple times, thereby saving banks more money.

7. Card type differences

There is only one type of ATM magnetic card, but there are three types of ATM chip cards: contact chip cards, contactless chip cards, and dual-interface chip cards.

3. Why should you use a chip-based ATM card?

High security of personal information

First of all, in terms of safety, chip cards are much safer than ATM cards, as the cards are designed to prevent card information theft and encrypt information with high security.

Strict operating procedures, guaranteed

A chip card transaction must go through many authentication steps, so only when the relevant organizations grant permission will the transaction be successful. Compared to magnetic cards, the implementation process is more complicated, but the processing speed is also very fast, within a few seconds.

What to note when using chip card?

Currently, there are a number of banks issuing international credit and debit cards with chips such as VIB, VietinBank, VietcomBank, Techcombank, ACB, Sacombank, Nam A Bank. Customers can contact each bank directly for more advice on chip cards.

To use a chip card, users will need to go to a store with a contactless card recognition symbol and tap the card on a POS or ATM. When paying, you do not need to take out the card, just let the chip side of the card contact the machine without having to take the card out.

In addition, to avoid paying too high fees when making transactions, you should:

1. You should withdraw money at ATMs in the system to reduce costs.
2. Internal transfer via ATM.
3. Chip cards can be used for online purchases globally.
4. Annual card maintenance fees may be higher than magnetic stripe cards, depending on the bank.

Lesley Montoya

Update 03 July 2025