system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: What exactly is the purpose of the chip on credit cards now. It's more secure, but how?
gpt
Basically, all an old card reader does is send a message to the bank asking "Is this a real card? I'd like to spend some money." and the bank says yes or no, and the cashier can proceed. The strip was easily read and it is easy to make a duplicate card this way.

The cards with chips have a tiny computer in them and when the card reader wants to make a transaction, it generates a special number based on the transaction. This number is then sent along with the other stuff. The bank knows how that number should be generated and can check if it got the right number.

The way the card generates that number isn't accessible to the card reader. There's a special key that the card never tells the reader and so it's much harder to copy the card, because in order for the bank to say it's valid, you need that key.

In the case of chip-and-PIN systems more popular in Europe, the card also makes use of your PIN when it makes that special code, as a way of verifying that the cardholder is present and someone didn't just steal the card.