Chip card technology has become the standard at merchants throughout the world supplementing or replacing the magnetic stripe readers that have been used for decades. Here’s a rundown of how chip-enabled cards make your point-of-sale transactions safer, as well as why you still need to take precautions to safeguard your personal information.

Every credit card holder in the world should knows the “swipe and sign” checkout ritual. Line up the magnetic stripe, swipe the card, press “OK” for the amount to be charged, and then sign your illegible scrawl on the screen. The swipe and sign system is so common in the world that travelers are often shocked to learn that almost no other country still does it this way. The international standard for credit card security is called “chip and PIN,” With chip and PIN cards, the credit card data is stored on a tiny computer chip — not a magnetic stripe — and customers punch in a four-digit PIN (personal identification number) instead of signing the screen.

What’s wrong with swiping your credit card’s magnetic stripe?

The key problem with magnetic stripes on credit cards is that they contain all of the cardholder information that would be necessary to make a purchase, or to duplicate the card. With the rapid advances in technology over the past decade or so, magnetic stripe data has become significantly easier for thieves to steal, after which they can use it to create new cards, or sell it to others.

How do chip cards help solve the problem?

Credit and debit cards equipped with computer chips are also called EMV® cards, which are the global standard used to authenticate card transactions without using magnetic stripes.

Without getting too technical, here’s the key point to know. While the data in a card’s magnetic strip stays the same over time, the chip in your card generates a unique code for each transaction that can only be used once.

Thus, even if a thief managed to copy the EMV® chip information used to validate a given point-of-sale (POS) transaction, they would be unable to do anything with it. The same point holds true for a data breaches at retailers: While chip-based card technology doesn’t prevent hackers from stealing transaction data or records, it does make the data itself far less valuable to thieves.

So, while inserting your card into a payment terminal and waiting for it to process marginally less simple than swiping your card, it’s certainly a more secure way of using plastic at retail stores, gas stations, and other locations where you make in-person payments.