Article: US Credit Cards becoming unusable overseas - lacks newer security chip

[Desiree]

For Americans, Plastic Buys Less Abroad

By MICHELLE HIGGINS

BETTERpack some cash on your next trip abroad. Americans are finding thattheir credit and bank cards aren’t as convenient as they once werewhile traveling overseas.

The problem: American cards lack aspecial chip, now commonly used in many foreign countries, causing thecards to be rejected by some merchants and kiosks.

That’s whatNancy Elkind, a lawyer from Denver, discovered in Paris when she wantedto use the popular Vélib’ bicycle rental system on a week long vacationwith her husband last spring. They tried to swipe various cards at therental kiosk, which doesn’t take cash, and all the cards were rejected.

Then,thinking the problem might be with the kiosk and not their cards, theytried other Vélib’ locations around the city. But each time, theircards were not accepted.

“We gave up, and kept walking aroundParis, commenting occasionally on how much fun it would be to do someexploring by bike,” Ms. Elkind said.

The couple’s cards, whichrely on magnetic-stripe technology for transactions, lacked an embeddedmicroprocessor chip, which stores and processes data and is nowcommonly used in Europe. Such chip-based cards — commonly referred toas chip-and-PIN cards because users punch in a personal identificationnumber instead of signing for the purchase — offer an extra layer ofprotection against the theft of cardholder data and counterfeiting, andthey are designed to replace magnetic stripe technology and signaturepayments.

The chip-and-PIN technology usually isn’t much of anissue when making purchases at a store, or paying for a meal in arestaurant, as most of those merchants still have credit card terminalsthat can read the magnetic stripes. Likewise, A.T.M.’s typicallyrecognize and accept many cards whether they have a chip or a magneticstripe.

But American cardholders have had their cards rejected byautomated ticket kiosks at train stations, gas pumps, parking garagesand other places where there are no cashiers.

The alternativesaren’t ideal. Carrying around a wad of cash is a throwback, not tomention a security concern, for many travelers trained over the yearsto use plastic for purchases abroad.

And as more countries aroundthe world move to chip-and-PIN cards, it’s inevitable that Americanswill encounter more difficulties paying for things abroad.

Twenty-twocountries, including much of Europe, Mexico, Brazil and Japan, haveadopted the technology, according to the Smart Card Alliance, anonprofit association that promotes chip cards. About 50 othercountries are in various stages of migrating to the technology in thenext two years, including China, India and most of Latin America,according to the association.

In the last year, Canada beganrolling out chip-and-PIN cards and plans to stop accepting magneticstripe debit cards at A.T.M.’s after 2012 and at point-of-saleterminals after 2015.

These governments like the cards becausethey reduce fraud. With an embedded microcontroller, large amounts ofdata can be stored on the card itself rather than in a centraldatabase, and counterfeiting such a card is difficult.

But theUnited States banking industry has no immediate plans to adopt thetechnology. Part of the reason, experts say, is that fraud issueshaven’t been as prevalent here as in other countries.

The expenseof converting the country to chip-and-PIN technology is also adeterrent. Javelin Strategy and Research, a consulting company for thefinancial services industry, has estimated the cost for the UnitedStates’ to migrate to the technology at $5.5 billion, mainly for newpayment terminals — an expense that neither retailers nor banks want toshoulder.

Doug Johnson, vice president for risk management policyat the American Bankers Association, said that American banks wereconcerned about security but that there were no plans to move tochip-and-PIN cards. “There are a lot of hurdles,” he said, “both from acost standpoint as well as a network standpoint, we need to broach.”

Itshould be noted that chip-and-PIN cards are different from the radiofrequency chip that some American credit cards now have, which allowscustomers to wave their card at a check-out scanner, instead ofphysically swiping it. Visa’s payWave cards and Expresspay cards from American Express are two examples.

Butregardless of the technology used, merchants have a certain amount ofcontrol over what kinds of cards they accept. Vélib’, for example,accepts American Expresscards whether they have chip-and-PIN technology or not. But it doesn’taccept Visa or MasterCards unless they have the chip-and-PIN technology.

CREDITcard issuers acknowledge the problems but offer few solutions at themoment. Randa N. Ghnaim, a spokeswoman for Visa, said the company wasworking with banks and merchants across Europe to ensure that theyaccept magnetic stripe cards in addition to chip-and-PINs.

“Wehave heard of limited instances where merchants have refused to acceptVisa magnetic stripe cards, but by and large, the majority of Visacards are seamlessly accepted internationally,” she said. “It’s usuallya lack of understanding that could lead to any issues rather than anyissue related to the type of card a consumer may carry.”

And atleast one company, Travelex, the global payment services company, saysit is working on a chip-and-PIN card for Americans that could be loadedwith up to 6,000 euros or £4,500 — about $9,000 or $7,400 at recentexchange rates. But that solution is still at least a year away.

“It’s definitely something we’ve been hearing more and more of,” said Tracy Hammock, a senior vice president at Travelex.

Fornow, though, there is little an American traveler can do besidesinsisting, if a cashier refuses your card, that the merchant swipe itanyway. Despite what the cashier thinks, the terminal may be able toread the magnetic strip and approve the purchase.

Butrealistically, it’s not a huge problem, and there are ways to workaround it. You can still buy things like train tickets and subway cardsonline ahead of time, carry traveler’s checks or simply pack a lot ofcash.

That’s what Hope Einstein, a retired financial analyst fromStamford, Conn., decided to do on a trip to Great Missenden, England,last month, after she encountered chip-and-PIN issues two years ago.Lucky she did. Ms. Einstein still wasn’t able to withdraw money fromA.T.M.’s. But this time, she wisely exchanged some dollars for poundsbefore leaving the United States.

Recalling her first visit, she said, “It’s humbling to be walking around London with five bucks in your pocket.”

Link: http://www.nytimes.com/2009/10/04/travel/04pracchip.html?_r=2&pagewanted=all

[smoker]

That's been true in France for years, but often you can get the retailer to do a swipe instead of using the (non-existent) chip.

[Desiree]

That's been true in France for years, but often you can get the retailer to do a swipe instead of using the (non-existent) chip.

I didn't know that and we hope to travel to France next summer.

[Wino]

The US is behind the world in this aspect. My bank puts my picture on my ATM/Visa card for security. Hard for me to believe the following statement, "the United States banking industry has no immediate plans to adopt the technology. Part of the reason, experts say, is that fraud issues haven’t been as prevalent here as in other countries." I would think credit card fraud and identity theft is a big problem in the US. Although, I do understand the reluctance to spend 5.5 billion dollars in this new technology.