It is getting increasingly more difficult for American’s to make credit card transactions overseas. American credit cards run on the standard magnetic-stripe technology while many foreign countries have made a shift toward chip-based cards commonly referred to as chip-and-PIN cards because users enter their PIN rather than sign. Some merchants and kiosks are rejecting credit cards of magnetic-strip technology because they lack the embedded microprocessor chip that processes and stores information. The reason behind this shift in credit card technologies is because the chip-and-PIN system offers extra protection against theft and fraud. More and more countries are moving toward the chip-and-PIN system, which will increase the difficulty for Americans trying to make credit card transactions overseas. Currently, twenty-two countries including much of Europe, Mexico, Japan and Brazil already adopted the technology. Another 50 countries or so are in the process of the move to the technology including India, China and most of Latin America. This past year, Canada started to offer chip-and-PIN cards and has plans to stop accepting magnetic-strip credit cards at ATM’s after 2012 and at point-of-sale terminals after 2015. Right now, most store or restaurant merchants as well as ATM’s still have credit card terminals that can read magnetic-stripe cards. Americans have experience credit card rejection at automated ticket kiosks at train stations, parking garages, gas pumps and others. The alternative, to carry around cash, is not a secure one.
The United States banking industry does not have any immediate plans to make the switch over to chip-and-PIN technology. One reason is because fraud issues are not as prevalent here as in other countries and because the conversion would be expensive (approximately $5.5 billion). The chip-and-PIN cards are different from the American credit cards that have the radio frequency chip which you can just wave in front of a scanner rather than swipe your card. Currently, Travelex is working on a chip-and-PIN card for Americans where you can load with up to 6,000 Euros or £4,500 (about $9,000). Still, that solution will not go into effect for at least another year. Until that happens, the most an American traveler can do is insist that the merchant try to swipe their credit card anyway when trying to complete credit card transactions overseas. The terminal may be able to read your card.
