Why You Can’t Just ‘Charge It’ for Overseas Purchases

More and more Americans encounter trouble—often major trouble—trying to use their credit cards in Europe, and the troubles are spreading to other countries. Unfortunately, for now, this is a serious problem without a serious solution. A fix, if any, is probably months if not years away, and meanwhile the situation for U.S. travelers keeps getting worse.

The problem is straightforward: Incompatible security and verification formats for credit cards.

• U.S. banks use the old “magnetic stripe” technology for security and charge authorizations: When you buy something in a restaurant, store, or hotel, a terminal reads information from a magnetic strip on the back of your card and you sign a chit for verification. Automated systems read the stripe and issue printed receipts.
• Banks almost everywhere else are switching to the newer “chip-and-pin” system: When you buy something, a terminal or an automatic machine reads information from a memory chip embedded in your card, and you enter a PIN for verification.

Just about everyone concedes that the chip-and-pin system is more secure. And just about everyone anywhere else but the United States is switching. Europe has already switched extensively; Canada, Mexico, Australia, most of South America, and most of Southeast Asia are either switching or planning to switch. Soon, the United States could be left alone with an obsolete standard, just as it is with the metric measurement system. {{{SmarterBuddy|align=left}}}The problem is also starting to crop up with ATM debit cards. So far, it isn’t as bad as with credit cards, but just wait a while…

Even where chip-and-pin cards are the norm, hotels, restaurants, and stores can still accept stripe cards—maybe after a bit of nudging—but many automated ticket, toll, and gasoline vending machines no longer accept our cards. Some of those are in locations with no attendant to hand-run a charge, and travelers have found long lines at places that do have attendants. The website GetFluent-C posts many travelers’ horror stories. So far, U.S. cards generally work in the transitioning areas, but that will change, too, and quickly.
What about a solution? All I can say for sure is, “Not now; maybe later.”

• So far, the only practical advice from the experts is to take a lot of coins anywhere you expect to need automated machines—many accept coins but not bills. The other conventional advice is a complete cop-out: “Plan ahead.” Feh!
• Apparently, the only U.S.-based bank now issuing chip-and-pin cards is the credit union for the United Nations. And no other U.S. banks have yet announced any plans to issue chip-and-pin cards.
• One bank in Milan issues a special card for American visitors, which you can get there, but I have no information on its financial particulars.

However, pressure from tourists, Wal-Mart, and other worldwide merchants is growing on U.S. banks to do something. GetFluent-C is trying to marshal public support for a switch; I urge you to support its effort.
The problem is not technology: Apparently banks could easily issue dual-system cards that work in both stripe and chip-and-pin modes. Some banks already issue dual mode cards with RFID chips for “contactless” transactions—a different system entirely—and there’s no technical reason why U.S. banks couldn’t issue dual-mode chip-and-pin or even three-mode cards.

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You’d think big U.S. banks would want to get out in front of this issue: Evidence shows that they’re losing money by ignoring chip-and-pin. With its policy of no surcharge on foreign transactions, Capital One clearly targets international travelers, and it is an obviously early adopter candidate. So is Bank of America, with its participation in the Worldwide ATM Alliance. And American Express should certainly be onboard, with its longstanding commitment to international travel. Unfortunately, I haven’t yet heard a peep out of them.

This is an extremely rare occasion when I highlight a problem without being able to recommend a practical work-around or solution. All I can say is that as soon as I get any positive news, I’ll report it.

Your Turn

How do you deal with incompatible plastic when traveling abroad? Share your thoughts, experiences, and advice by submitting a comment below!