Got a new credit card from your bank recently?

Look closely and you’ll notice there’s an embedded integrated circuit “chip” on the front of the card.

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It’s a complicated upgrade to a card that was basically designed back in the 1950s, and it’s a big improvement in fraud protection.

There are two ways the chip helps with fraud, actually. First, it makes the job of duplicating a card more difficult, even if someone has a photo of the front and back of your card and has recorded what’s on the magnetic stripe on the back. More importantly, with the right point of sale system, the card chip creates a unique transaction code that cannot be used again.

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As Dave Witts, president of U.S. payment systems for Creditcall explained, “if a hacker stole the chip information from one specific point of sale, typical card duplication would never work because the stolen transaction number created in that instance wouldn’t be usable again, and the card would just get denied.”

What you should have received when you got that new “chip and PIN” credit card from your bank was also a 4-digit PIN. It’s the combination of the secret code and the chip that make the transaction much more secure. Also, the data on these chips is actually encrypted, making it a lot more secure than the simplistic mag-stripe, which is easily swiped, read  and duplicated.

Don’t get too complacent, however, because none of these technologies offer much protection against online fraud. When you buy something at Amazon.com, Target.com or BestBuy.com, you’re simply typing in your credit card number, expiration date, and CCV, all of which are easily duplicated.

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And that’s a problem. American consumers only account for about 25 percent of all credit-card purchases worldwide, but are the victims of more than 50 percent of the world’s credit-card fraud. Indeed, not a month goes by without reports of another huge data breach from an online merchant.

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Not enough to worry about? Turns out you can also have your credit-card data stolen by simply having someone too close. Criminals can use RFID scanners to reap your digital bounty in a practice known as “skimming.” You can protect your cards by wrapping them in foil when not being used, or, if you don’t want to look like a crazy person, by purchasing a special foil-lined wallet.

You can protect your cards by wrapping them in foil when not being used, or by purchasing a special foil-lined wallet.

The new chip-and-pin cards are a step forward for security and preventing fraud, but it’s just one of many areas that need to be addressed by the industry if we are going to have completely secure credit cards.

Maybe it’s just a matter of convenience versus security, and we each get to decide which is more important after all.