Money Issues for us Travelers

New York Times June 8 2011, by Michelle Higgins

HOW TO AVOID CREDIT CARD PROBLEMS ABROAD

LIKE many Americans who have tried to use their credit cards in Europe, Elliot E. Porter, a historian from San Francisco, has encountered his share of payment headaches. Perhaps the most aggravating occurred a few months ago at Amsterdam Centraal Station, where he learned only after waiting in line to purchase train tickets that none of his credit cards, which include a MasterCard, Visa and American Express, would be accepted. The problem? They rely on magnetic-strip technology rather than embedded microprocessor chips, which are becoming increasingly common outside the United States.

“This is a big deal when traveling,” said Mr. Porter, who trekked back to his hotel to get cash, which he then had to exchange for local currency before returning to the train station to wait in a long line to pay for his tickets. He encountered similar problems at train stations in Belgium and Britain. “It just got super frustrating,” he said.

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There may be some good news on the horizon for Americans like Mr. Elliot. A few banks have begun testing cards with the newer chip technology, known as E.M.V. (for Europay, MasterCard and Visa) and are beginning to offer the cards to select customers. Wells Fargo has issued cards with the embedded chips to about 15,000 United States-based clients who travel internationally, in a trial program. JPMorgan Chase is offering the cards to some of its high-net-worth customers this month. Meanwhile, Travelex, a major currency exchange company, began selling a preloaded E.M.V.-enabled debit card last year. Some credit unions have also begun offering credit or debit cards with chips, including the State Employees’ Credit Union of Raleigh, N.C., and the United Nations Federal Credit Union in New York.

It’s about time. Over the last decade, such cards (commonly referred to as chip-and-PIN cards because users punch in a personal identification number instead of signing for the purchase) have been widely adopted in Europe as a means to reduce credit card fraud; the information stored in the magnetic strips used in traditional cards can be stolen fairly easily. E.M.V.-enabled chip cards, requiring a PIN for authentification, are harder to counterfeit and are becoming the standard in other regions, including Canada, Latin America and the Asia-Pacific region. More than a third of the world’s payments cards (approximately 1.2 billion) are E.M.V. capable, along with roughly two-thirds of cashier terminals (18.7 million), according to EMVCo, the standards body owned by American Express, JCB, MasterCard and Visa.

But the United States has been slow to adopt the technology, mainly because of the expense merchants and banks would have to take on to convert to E.M.V.-enabled cards and cash registers. (Frau Bakers says that most of these new cards have BOTH the chip AND the strip; which takes the air out of that comment. Probably the real reason we haven't switched after all these years is far simpler: US Banks seem to value the money they make on the vastly higher fraudulent usage that comes from strip-swiping, as opposed to chip with pass-code security.)

American banks also point out that fraud involving credit cards with magnetic strips hasn’t been as prevalent in the United States as it has in other countries. (Chip-and-PIN cards are different from the radio frequency chip in some American credit cards, like the American Express Blue card, which allows customers to pay by waving their card at a check-out scanner, instead of swiping it.)

Until businesses change their minds, American travelers will continue to encounter payment issues abroad. The problem is two-fold. Even though most European cash registers are equipped to handle American cards, some cashiers simply don’t know how to process them. And many automated ticket kiosks like those commonly found at train stations, gas pumps and parking garages simply don’t accept cards without a chip and PIN. (A.T.M.’s typically recognize and accept many cards whether they have a chip or a magnetic strip.)

So what’s a traveler to do? Since the cards being tested by Chase and Wells Fargo are being offered only to a limited number of mostly high-end customers, the best option for the rest of us is to carry a couple of cards in our wallets and politely insist that the cashier keep trying to swipe each credit card, as the card reader may be able to recognize the magnetic strip and approve the purchase.

That’s what Richard Brill, a public relations executive from Wilmette, Ill., learned last month while on vacation in Portugal. “In some cases they’d redo it,” he said, referring to the merchants who were able to get their machines to accept his Visa card. When such attempts failed, he tried using his American Express card, which was accepted a number of times, even though it also lacked the special chip.

For backup, also consider carrying a preloaded debit MasterCard from Travelex called Chip and PIN Cash Passport, available in pounds or euros, which is equipped with the embedded chip. But use it only when you can’t use other cards. While it does not cost anything to use the card, the exchange rates you’ll get when loading it with cash aren’t great. For example, in late May, the exchange rate when putting funds into a Travelex Chip and PIN card online was about $1.50 to the euro. (It can be higher in actual Travelex stores.) By contrast, the spot exchange rate, charged by most banks, was roughly $1.42, according to Bankrate.com, a financial research site. Even after adding the 3 percent foreign exchange fee typically charged by major American card issuers, it was still more expensive to use a Travelex Chip and PIN card.

That said, there are some transactions — like buying train tickets at kiosks — for which you will need a Travelex card; remaining funds can be converted back to dollars after your trip.

Before you go, also consider buying tickets and other basic purchases online. For example, Vélib, the popular Paris bicycle rental system, whose rental kiosks have been known to reject cards without embedded chips, now accepts online payments for one- and seven-day tickets at velib.paris.fr. Rail Europe, which lets American tourists buy many European train tickets in advance, recently added local British train tickets to its online offerings at raileurope.com.

And when you return home, be sure to let your bank know about any payment problems. That just may be the best way to motivate them to issue chip-based cards to travelers.