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Why Your Credit Card Is Going 'Chip-and-PIN'

Many Americans have received a new credit or debit card in the mail with a computer chip on the front.

Many Americans have received a new credit or debit card in the mail in with a computer chip on the front. If you’re not sure what the chip is all about, you’re not alone: One survey showed that about 75 percent of respondents didn’t understand why they were being sent the new chip-embedded cards.

It’s all part of a nationwide shift in the way we pay, with the goal of beefing up credit-card security. The new "smart" chip cards use EMV (which stands for Europay, MasterCard and Visa) technology, which generates a unique code every time the card is used.

It's more secure than the traditional magnetic-strip cards, because the code in those strips don't change. If a hacker got a hold of that strip information, they could make a physical copy of the card.

These EMV cards have been around since the 1990s, and much of Europe and the U.K. already use this technology. But they're new to America. Starting October 1, U.S. merchants -- not card issuers -- will be responsible for fraudulent transactions if they don't upgrade their payment terminals.

Related: Credit Cards Now Come With a Chip Embedded

But the switch comes with tradeoffs, and it won't stop all credit-card fraud.

"In countries that have moved to chip technology, two years after the liability shift date, they see their counterfeit go down 60, 70 percent or more," Stephanie Erickson, head of authentication and product integration for Visa, told NBC News.

The new chip cards also require a learning curve at the checkout line. Instead of swiping, shoppers "dip" the card by inserting the chip end for several seconds. It's a major change for businesses too, which may have to shell out $200 to $1,000 per new payment terminal to handle the chip-card payments.