USDA proposes mandatory chip cards for SNAP benefits

The U.S. Department of Agriculture released a proposed rule last week that would require all states to replace magnetic stripe food assistance cards with chip-enabled versions. The change aims to stop card skimming, a fraud method where thieves steal data from payment terminals. Under the new proposal, states must also ensure that retailers accepting SNAP benefits have payment terminals that support tap-to-pay functionality.

SNAP cards currently rely on magnetic stripes, which are easier for thieves to read than microchips. Banks switched to chip cards more than a decade ago, but state agencies have been slower to follow. According to the USDA, fewer than one-third of states have completed or started this transition. The Food and Nutrition Administration, which administers SNAP, cited skimming as the primary reason for the proposal. They stated that the changes will protect benefits and ensure approved households can access their food aid.

The financial impact of the fraud is substantial. In January, the USDA Office of Inspector General projected that theft would reach $233 million between 2025 and 2026. A separate investigation by ProPublica found that $470 million was stolen electronically from SNAP recipients last year. This figure came from data provided by Propel, an app that allows recipients to check their balances. In most states, stolen benefits are not replaced. Recipients often have to skip meals or borrow money to buy groceries when funds vanish.

State officials and members of Congress from both parties have generally supported modernizing the cards. However, the cost has been a major obstacle. The Government Accountability Office notes that chip cards cost about 10 times more to produce than magnetic stripe cards. The USDA acknowledged this financial burden in the proposed rule. It said the department views the administrative costs as a necessary investment to stop the loss of federal funds. The agency noted that states have had access to administrative funds for years but few acted on them.

The proposal comes as state SNAP agencies face new budget pressures from the One Big Beautiful Bill Act. The USDA said the rule has been in development for nearly four years. The department estimates the changes will reduce stolen benefits by at least $1.5 billion over the next decade. Last week, the Justice Department announced that its fraud division uncovered nearly $42 million in schemes targeting food benefits. These investigations included identity theft and retailers illegally exchanging cash for benefits.

The public has 60 days to submit comments on the proposal. After that period, the USDA will publish a final rule. The department is considering giving states a two-year deadline from that publication date to implement the changes. It is also asking for input on whether that timeframe is sufficient.