USDA Moves to Mandate Chip Cards for All Food Assistance Programs

The U.S. Department of Agriculture released a proposed rule on October 19 requiring all states to switch to chip-enabled cards for the Supplemental Nutrition Assistance Program.

The proposal aims to replace the magnetic stripe technology currently used on most Electronic Benefits Transfer cards. These older cards are vulnerable to a type of theft known as skimming, where criminals copy data from payment terminals to drain recipient accounts.

Banks have largely moved to chip and tap-to-pay technology over the last decade, but state agencies have lagged behind. According to the USDA, fewer than one-third of states have completed the transition or are currently in the process.

The new rule would also require retailers that accept SNAP benefits to install payment terminals that support tap-to-pay transactions. The Food and Nutrition Administration stated that these changes are designed to protect benefits from thieves and ensure they remain accessible to approved households.

Financial data supports the urgency of the switch. A January report from the USDA Office of Inspector General projected that SNAP theft could reach $233 million between 2025 and 2026. A separate investigation by ProPublica found that $470 million was stolen electronically from recipients last year, using data from the Propel app which tracks benefits.

For many recipients, stolen funds are not replaced by state agencies. This forces individuals to skip meals or borrow money to buy groceries, according to Propel.

The cost of upgrading has been a primary barrier for state officials. The Government Accountability Office notes that chip-enabled cards cost about ten times more to produce than magnetic stripe versions. State agencies are also facing new budget pressures from the One Big Beautiful Bill Act.

The proposed rule acknowledges the financial burden but frames the expense as a necessary investment. The department stated that it views the administrative costs as a way to deter the loss of federally funded benefits. The USDA noted that states have had access to administrative funds for years to address the issue but few acted.

The public has 60 days to submit comments on the proposal. The USDA is considering a two-year deadline for states to implement the rule after a final version is published. The agency estimates the changes will reduce stolen benefits by at least $1.5 billion over the next decade.

This move follows a broader push by the administration to target fraud in food assistance programs. Last week, the Justice Department announced its fraud division uncovered nearly $42 million in schemes, including identity theft and illegal cash exchanges at retailers.