Why do I tap my credit card?

This is just a friendly reminder to double check who is in your group chats. You don’t want to be texting some dark humor jokes to your Aunt or war plans to a journalist… Everyday, there is news that rivals episodes of Veep and articles from the Onion.

For our entire lives, you swiped your credit card. Then, like two months ago, we started inserting it and now we are tapping it?? Let’s first answer the most important question: where do you tap?

Tap the part of your credit card with this symbol:

(A lot of people think you tap the chip, but they are wrong.) 

To wherever you see this symbol:

I swear there is a machine that doesn’t show you this symbol, and I get mad every time. I end up just rubbing my credit card all over the machine like an idiot. 

I know I could just insert and move on, but I like using the newest technology to be hip. It’s also a nice little dopamine hit whenever you hear the little beeps saying the payment worked.

Okay, so why did we stop swiping our cards? 

When you swipe your card, the magnetic strip transmits all your credit card data to the terminal (payment machine). Then, the terminal sends this to the bank and says “give me money from this card.” A criminal can collect this data by attaching a physical device to the terminal or intercepting the communication. Then, the criminals can run around charging your credit card places because they have all the information they need. 

The chip and tap methods are far more secure because your credit card gives the terminal a secret code instead of the card number. The terminal takes this secret code and sends it to the bank. The bank matches the code with your credit card, runs its security checks, then sends the requested money without ever giving up your credit card information. 

Also, each transaction uses a new code to verify the transaction. If a criminal steals your token used in one transaction, it will be useless the next time.

The chip and tap-to-pay use different technology but the same principle to communicate with the bank. The tap-to-pay is faster than the chip. If you are avoiding the tap, I recommend trying it. It is way more fun.

Tap-to-pay uses Near Field Communication (NFC) where a passive device in your card patiently waits for the active terminal to ask it for information. Your credit card doesn’t need a battery because the active terminal provides the power to activate the RFID (Radio-Frequency Identification) technology.

Smartphones have all the same technology to utilize NFC for payments. When you input your credit card information to your digital wallet, the bank sends the necessary token and encryption information to your phone. That way, your phone can transmit the data to the payment terminal just like your credit card. It works even when you don’t have cell service because your wallet stores the data.

The possibilities don’t end with your phone. We already have people inserting chips into their bodies (no, not vaccines) to make payments. As scary as this seems, I am so excited for it. This is the purpose of technological advancements - make my life easier. If I could have a chip in my hand with my ID and credit card information, I wouldn't even need to carry a wallet. It would be VERY difficult to lose a chip inserted into my hand (not impossible though).

All this to say, credit card technology has advanced away from the swipe to be more secure. Soon, criminals will find a way to compromise the tap/insert, and we will have to learn a new method. It is the circle of life.

Debrief on Deck

Next week is our monthly market debrief for March. Tariffs and threats of tariffs continue to loom, the Fed opted to hold interest rates steady, and the Commerce Secretary is publicly endorsing a certain individual stock, so you could say its been another normal month in the world of finance.

As always, please reach out to us with any questions or comments you have. You can reply directly to this email or find us on Instagram.

Until then, stay the course.

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