USDA Proposes Mandatory Security Microchips for EBT Cards to Fight Skimming Fraud

The federal government is moving to force all states to overhaul their food assistance cards, proposing mandatory microchips and tap-to-pay tech to combat widespread digital theft. Under a new rule released last week by the U.S. Department of Agriculture, state agencies administering the Supplemental Nutrition Assistance Program must phase out legacy magnetic stripe cards. Retailers participating in SNAP would also be required to support contactless payments at their checkout counters. The federal push comes after years of rampant card skimming, where criminals install hidden devices on payment terminals to drain benefit balances. “These proposed changes will protect SNAP benefits from thieves and ensure benefits are accessible by approved households,” the Food and Nutrition Administration noted in its summary of the regulation. According to the USDA, fewer than one-third of states have issued chip-enabled Electronic Benefits Transfer cards or begun the transition. Most commercial banks switched to chip technology over a decade ago, but EBT cards have remained reliant on vulnerable swipe technology. That lag has proven costly. In January, the USDA Office of Inspector General projected that SNAP theft could climb to $233 million between 2025 and 2026. Data analyzed by Propel, an app that tracks food benefits, revealed an even starker toll, with an estimated $470 million stolen electronically from recipients last year.

Cost Barriers and Timeline Debates

While state officials, federal watchdogs, and lawmakers from both parties support upgrading card security, production costs have created a significant bottleneck. Data from the Government Accountability Office shows that chip-enabled cards cost roughly 10 times more to produce than magnetic stripe cards. State SNAP agencies face additional financial pressures stemming from President Trump’s One Big Beautiful Bill Act. Although the USDA acknowledged these budget concerns, it maintained that upgrading the technology is essential. “As stewards of taxpayer dollars, the Department considers these administrative costs as a necessary investment to deter the loss of Federally-funded SNAP benefits,” the proposed rule stated. When pressed on whether federal funds would be provided to help states offset the manufacturing costs, the USDA pointed to past inaction by local administrators. “For years, States had access to administrative funds to stop this egregious abuse of taxpayer resources. Yet few acted,” the department stated.

Broader Anti-Fraud Push

The USDA estimates that requiring chip cards and updated terminal technology—a measure nearly four years in development—will prevent at least $1.5 billion in benefit theft over the next decade. The mandate aligns with a broader push by the Trump administration targeting fraudulent practices in public assistance programs. Last week, the Justice Department announced its fraud division exposed nearly $42 million in schemes involving identity theft and illicit cash-for-benefits exchanges at retail stores. The public now has 60 days to submit feedback on the proposed regulation. Once the final rule is published, the USDA plans to give states two years to complete the transition to chip technology, though it’s currently seeking feedback on whether that timeline is realistic.