Why EBT cards are still a preferred skimming target
Electronic benefit transfer systems process SNAP and TANF payments using the same magnetic stripe technology that commercial banking moved away from over a decade ago. Magnetic stripe data can be read, copied, and replicated with widely available equipment. Criminal groups install skimmers on ATMs, fuel pumps, and POS terminals at SNAP-authorized retailers, capture card data and PINs, and produce clone cards that work at any terminal that accepts the magnetic stripe. Unlike credit card fraud, where losses fall on issuers and merchants, EBT fraud falls on recipients — and on state agencies that are now required by federal law to replace stolen benefits.
The September 2025 GAO report on SNAP EBT card security (GAO-25-107964) identifies the core vulnerability plainly: EBT cards are targets because most lack the theft-prevention features that are standard in commercial payment cards. The same report counts at least $320 million in stolen benefits across the two-year period ending December 2024 and notes that underreporting means the true figure is likely higher.
The legislative and regulatory context
The Consolidated Appropriations Act of 2023 (P.L. 117-328, Division HH, §501) did two things relevant to state IT shops. First, it gave USDA temporary authority to fund federal replacement of SNAP benefits stolen through skimming and cloning — a provision that has been extended through subsequent legislation. Second, it directed USDA to require state agencies to implement security measures that effectively deter skimming. States are now required to collect and regularly report skimming data to the Food and Nutrition Service.
USDA's Food and Nutrition Service followed with an October 2022 guidance on card security tools and an October 28, 2024 letter to states urging transition to chip-enabled cards, tap-to-pay functionality, and mobile wallet payments. The X9 Committee, which sets U.S. payment industry standards, ratified revised EBT technical standards in August 2024 to support these capabilities.
As of September 2025, the GAO report noted that FNS was developing a proposed rule — planned for publication in January 2026 — that would require card security measures across SNAP jurisdictions. State IT teams should confirm current rule status through the FNS website and their FNS regional contacts; a final rule imposing mandatory conversion timelines would change procurement sequencing significantly.
An additional bill, the Enhanced Cybersecurity for SNAP Act, was introduced in Congress in 2026 and would require states to replace magnetic-stripe EBT cards with chip-enabled cards and establish a USDA grant program to help eligible small retailers upgrade to chip-capable POS terminals. Legislative status should be tracked separately from administrative rulemaking.
Where states actually are
As of the USDA's chip card status map last updated in August 2026, seven states had issued chip-enabled EBT cards to at least some participants: Alabama, California, Maryland, Massachusetts, Michigan, New Jersey, and Oklahoma. New Jersey completed a statewide rollout in September 2026. Virginia announced its own rollout the same month.
California is the most thoroughly documented case. The state completed its statewide conversion in April 2025, issuing replacement cards to all 4.4 million EBT clients. Governor Newsom's office reported an 83% reduction in EBT fraud over the following year, with monthly benefit replacement payments dropping from approximately $8 million in January 2024 to approximately $1 million by November 2025. These figures credit chip-and-tap cards alongside other fraud measures the state implemented concurrently, including card transaction alerts and out-of-state transaction blocks; the chip migration was not the only change in effect.
The other states with active programs are at varying stages: some have completed county-level pilots, others have issued cards to new enrollees while phasing in replacements, and some are mid-statewide rollout. The remaining 46 or more SNAP jurisdictions have not yet converted.
The terminal fallback gap
The chip card program's biggest limiting factor is not on the state side of the transaction. It is the point-of-sale terminal network at SNAP-authorized retailers.
An EMV chip transaction requires a chip-capable terminal. When a cardholder inserts a chip card at a terminal that cannot read the chip, the terminal falls back to reading the magnetic stripe — which means the chip provides no fraud protection for that transaction. Reports from California's early rollout period indicated that a substantial share of transactions at SNAP-authorized retailers were falling back to magnetic stripe because the retailer's terminal lacked chip capability. Smaller retailers, corner stores, and rural vendors — who serve a disproportionate share of SNAP households — are slower to upgrade terminals than large chains.
This is the key reason California's fraud results, strong as they are, need to be read carefully. Recipients who transact primarily at large chain supermarkets with modern terminals benefited from the chip. Recipients who rely on smaller retailers or convenience stores may have continued using the magnetic stripe path for months or longer after receiving a chip card.
State IT shops and benefits agencies should request retailer terminal readiness data from their EBT processor and from the USDA FNS SNAP-authorized retailer database before finalizing a chip card deployment timeline. The alternative is a card conversion that counts as completed but leaves a significant share of transactions unprotected.
What the terminal upgrade problem means operationally
State agencies do not control SNAP-authorized retailer terminals. Retailers acquire and maintain their own POS equipment. States have limited direct leverage.
What states can do:
- Coordinate with EBT processors on terminal incentive programs. Some EBT processors offer subsidized terminal upgrade programs for retailers in exchange for multi-year contract extensions. A card conversion timeline that is coordinated with the processor's terminal program produces better coverage faster than one that treats card issuance and terminal readiness as separate problems.
- Use FNS outreach resources. FNS has developed materials to help states communicate chip card requirements to authorized retailers. State benefits agencies and FNS regional offices can coordinate outreach that informs retailers of the transition timeline and directs them to upgrade resources.
- Build acceptance tracking into deployment metrics. Count chip-on-chip transactions as the success metric, not cards issued. The transaction data from the EBT processor shows what percentage of chip card transactions are actually using the chip versus falling back. That number should be tracked monthly during rollout.
- Monitor the legislative grant program. If the Enhanced Cybersecurity for SNAP Act or equivalent legislation passes, it includes a federal grant program for eligible small retailers to upgrade terminals. States should be prepared to administer or coordinate that program.
The fraud detection and recovery layer
Chip card programs change the nature of fraud rather than eliminating it. Once magnetic stripe skimming becomes less viable, fraud patterns shift: account takeover (using stolen credentials rather than cloned cards), social engineering, and benefits trafficking typically increase as a share of the remaining fraud. State benefits fraud units should plan for this transition proactively, not reactively.
The benefit replacement program created by the Consolidated Appropriations Act of 2023 has imposed its own operational burden. State agencies must receive, validate, and process replacement claims from recipients who report stolen benefits, report aggregate data to FNS on skimming incidents, and reconcile replacement payments against federal funding authorizations. That administrative infrastructure needs to scale appropriately during the transition period, when skimming fraud is declining but not yet eliminated and replacement claims are still active.
States that have not invested in fraud detection recalibration — updating transaction anomaly models to reflect chip transaction patterns — risk both false positive spikes (legitimate chip transactions flagged as suspicious) and false negative gaps (novel fraud methods not yet modeled). Benefits fraud detection systems that were tuned to catch magnetic stripe-based anomalies need to be retrained on chip transaction data.
Decision sequence for state IT and benefits leadership
If your state has not yet launched a chip EBT card project, the following sequence reflects how the states that have completed conversions organized the work:
- Confirm your EBT processor contract terms. Chip card issuance typically requires a contract modification or new RFP. Understand whether your current processor supports chip-and-tap issuance, what the timeline is, and what terminal certification process is required.
- Request terminal readiness data. Ask your processor for the percentage of chip-capable terminals at your SNAP-authorized retail network. Map coverage against recipient demographics to understand where fallback risk is concentrated.
- Confirm FNS rule status and timeline. The proposed rule planned for January 2026 publication, if finalized, will set minimum requirements and potentially compliance deadlines. Knowing what is required avoids both over-building and under-building.
- Design replacement card issuance for the existing recipient population. 4.4 million cards is California's number; yours will differ. Plan for attrition of unreturned cards, replacement for residents who do not respond to initial mailings, and TTY/accessibility accommodations for recipients who need in-person assistance.
- Establish chip transaction tracking as a deployment metric from day one. Don't wait until rollout is complete to measure terminal fallback. Track it monthly from the start of phased deployment.
- Brief your fraud operations team on expected fraud pattern shifts before chip cards reach saturation. Establish a review checkpoint 90 days into production rollout.
What this is telling state technology buyers
The EBT chip migration is a case study in the difference between completing a technology delivery and achieving the outcome the delivery was meant to produce. A state can issue chip cards on schedule and still leave most transactions running on magnetic stripe for months. The gap is not a vendor failure; it is a system boundary problem. The card is one component in a network that includes processors, terminal manufacturers, retailers, and recipients, none of whom are under direct state IT control.
Spartan X works with state technology programs on exactly this kind of multi-stakeholder system transition — where the state's deliverable is one layer in a larger operational chain and success depends on coordinating actors who aren't direct contractors. That includes helping program teams define the right metrics, build the monitoring infrastructure to track them, and structure vendor relationships to create accountability for outcomes rather than outputs alone.
Sources and further reading
- GAO-25-107964: Nutrition Assistance — USDA Should Comprehensively Assess Benefit Theft Prevention Measures States Are Implementing (September 25, 2025)
- USDA FNS: SNAP/TANF EBT Card Skimming Prevention
- FNS Letter to States on Chip Card Transition, October 28, 2024
- NACS: SNAP Modernization & EBT Chip Cards (updated May 2026)
- Alabama joins early state efforts to launch chip-enabled EBT cards, Route Fifty, February 2026
- Newsom touts gains against EBT theft, CalMatters, January 2026
- Governing: States and Feds Consider a Simple Solution to SNAP Fraud
