ELI5 Credit Card Security - is a chip really safer than a magstripe?

Why are the new chip and pin credit cards safer than the magnetic stripe, especially when most cards still have both? How is the 3 digit security code useful? What is credit card skimming and how does it work? Why does American Express have a different security code format to Visa and MasterCard?

 

... We explain like i'm five!

 

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Thank you to the r/explainlikeimfive community as always and in particular the following users whose questions and comments formed the basis of this discussion: cleanaxe, hecre8ivewon, bringer_of_words, tehwildman, theapiary, longtimegonemtgo, ddacke, benthevining & wwwyzzrd.

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