USDA proposes chip tech requirements for electronic benefit transfer cards

States participating in the Supplemental Nutritional Assistance Program could be required to issue electronic benefit transfer cards that include chip technology under a proposed U.S. Department of Agriculture rule. But without federal support, the proposal feels more like an unfunded mandate for states as they implement other required changes to federal benefit programs, observers say.

USDA could require states to issue chip and contactless payment cards to SNAP beneficiaries, a move aimed at strengthening program integrity and security, according to a proposed rule posted to the Federal Register on Oct. 23. The public comment period for the proposed rule ends Dec. 22. 

Currently, chip EBT cards are in use across eight states — Alabama, California, Maryland, Massachusetts, Michigan, New Jersey, Oklahoma and Virginia. Efforts to introduce modernized EBT are underway in at least seven states — Arkansas, Maine, New Mexico, New York, Oregon and Pennsylvania. 

Thirty-six states would be left to begin compliance with the proposed rule if it becomes finalized, and they would have two years to do so, according to the USDA. The agency also estimates that the transition to chip EBT cards would incur a one-time cost of $283 million across state agencies, the federal government, households and businesses. 

“The department acknowledges that a transition to EBT cards with chip and [near field communication] technology will come at a financial cost to the state agencies administering SNAP and to other entities involved in the operation of EBT systems,” the proposed rule reads. “However, the department believes that it is critical for SNAP clients to have reliable and secure access to the benefits that they use to purchase food for their families, and that the transition to chip and NFC cards in the credit/debit industry has proven the effectiveness of the technology involved in reducing incidents of fraud.” 

Indeed, chip technology offers more security against skimming devices that can steal card data than traditional magnetic-stripe technology, said Dan  Mintz, director of safety net policy at the civic tech nonprofit Code for America. 

Unlike commercial credit or debit cards, SNAP beneficiaries are not alerted when their funds are spent without authorization, and the program through which people could request reimbursement for stolen benefits with federal funds ended in December 2024, he explained. 

Since then, states have reported replacing more than $360 million in SNAP benefits for 753,929 claims as of the second quarter of federal fiscal 2025. Two states — California and Maryland — offer state-funded programs for stolen food or cash benefits, and New Jersey lawmakers introduced a bill earlier this year to establish a Stolen SNAP Benefits Replacement Fund.  

In Maryland, which expanded chip EBT cards statewide in August after deploying them as a pilot program the previous month, SNAP reimbursements have declined by 73% from $2.5 million in fiscal 2026 to $668,000 in fiscal 2027, state officials announced late last month. 

The USDA’s proposed rule addresses “a real source of fraud that's happening in the [SNAP] program,” said Rebecca Piazza, executive director of safety net strategy at Code for America, but states’ work to comply with the proposed rule, if finalized, is “going to come into tension” amid ongoing changes to the SNAP program to which states are already subject.

Indeed, under President Donald Trump’s One Big, Beautiful Bill Act, states face increased SNAP costs. As of Oct. 1, federal funding for SNAP administration was reduced from 50% to 25%, forcing states to bear 75% of the cost to transition to chip EBT cards, according to the United Council on Welfare Fraud Statement. 

“While well intentioned, states already dramatically underfund [fraud, waste and abuse] efforts, and layering on an unfunded mandate of this magnitude won’t help,” Keith Miskie, president of UCOWF said in a statement at the time that the proposed rule was announced. 

“In fact, California already transitioned its SNAP program to chipped cards at a cost of $100 million, but that was split 50-50 with the federal government. So, USDA really needs to stop and think before putting this type of burden on the states,” he said. 

States are also scrambling to reduce their payment error rates, as a rate at or above 6% means they must pay a higher share of SNAP administrative costs starting Oct. 1, 2027. The USDA estimates the average payment error rate nationwide is nearly 11%. 

“There are a number of challenges that states will face when implementing [these changes], even with or without funding,” said Kira Tebbe, senior manager at the Aspen Institute’s financial security program. For instance, “one factor is that in many states, EBT teams are quite small. It’s truly one or two people … responsible for everything under the sun related to EBT.” 

Beyond staffing constraints, the administrative and technical work states are doing to comply with SNAP’s cost-sharing responsibilities and upcoming payment error rate penalties already “dip into limited state funds available,” she added. 

As an example, she pointed to recent survey findings from the American Public Human Services Association that showed that 22 states reported dedicating resources from other priorities to focus on payment rate accuracy. Five states also reported that they are delaying EBT chip card implementation or related investments as a result of the federal changes to SNAP. The survey includes responses from 39 states. 

Even more jarring is that four states signaled that these major fiscal changes to SNAP could push them to pause or completely withdraw from participating in the program, Tebbe said. 

“A state having to withdraw from the SNAP program would be devastating for both its residents and its merchants and grocers and the rest of its economy,” she said. 

According to the USDA’s Economic Research Service, “an increase of $1 billion in SNAP benefits increases the [gross domestic product] by $1.54 billion. Additionally, the same increase supports 13,560 additional jobs.”  

“It’s really great to see USDA put out these [chip technology] standards … I think there’s a lot of promise in them,” Tebbe added, but “the broader reality is that state agencies who administer SNAP programs are under a lot of distress right now, and the fear is that these new mandates without additional funding could add to burden and could possibly lead to program exit."