The Big Misconception About Using Credit Cards Abroad

NEW YORK (MainStreet) — Many Americans believe incorrectly that paying abroad will be problem-free if they replace their traditional magnetic stripe credit card with a chip-enabled credit card.

It's a common credit card misconception that many international travelers are not aware of, said Matt Schulz, senior industry analyst at CreditCards.com, an Austin, Texas credit card comparison website.

Most of the chip-enabled credit cards offered by U.S. financial institutions are chip-and-signature cards, not the more advanced chip and PIN cards.

"Most people think if they have a card that has a chip with it, they will be golden when they go to Europe," he said. "That's not the full story."

Also See: Credit Cards Are Made Safer Overseas

Consumers who lack a PIN number will probably have trouble using their credit card even if it is a chip-and-signature card at places like unmanned train ticket machines and toll booths especially in Europe, he said.

"In your touristy spots, consumers will be fine using swipe technology, especially in larger cities," Schulz said. "The issue comes when you get off the beaten path and need a chip-and-PIN card."

The good news for travelers is that more chip and PIN cards are being made available by major financial institutions and credit unions such as Barclays, USAA and Wings Financial Credit Union, he said:

"If you are a member of a credit union or a smaller bank and you're in the market for a chip-and- PIN card, it would be worth calling and asking whether they offer one," Schulz said. "You never know what you might find."

Since the chip-and-PIN cards contain computer chips, the technology can authenticate the transactions and protect consumers from data breaches and other types of fraud.

"We will end up seeing more chip-and-PIN cards," Schulz said. "JP Morgan Chase and Target will have them out by early 2015 due to the big data breach. This card technology will become the norm in the U.S. eventually."

Users who obtain the Barclay Arrival Plus card need to be sure set up their PIN, which they can do online and make one standard chip and signature transaction while traveling abroad for the pin to be activated, said Erik Larson, president of NextAdvisor.com, the Burlingame, Calif. website that rates and reviews online and consumer resources, including credit cards.

"This card also has no foreign transaction fees and an introductory bonus worth $400 in travel and ongoing rewards that amount to 2.2% cash back on all purchases to spend on travel," he said. "It also has some other nice perks like free FICO scores every month. I have one of these cards myself and highly recommend it."

Credit cards having an EMV chip will provide the security for card-related frauds, since it can not be easily copied or skimmed like magnetic stripe-based credit cards, said Gokhan Inonu, president of Cardtek USA, a Chicago-based software company for financial transactions and EMV migration.

There have been 368 significant data breaches so far in 2014, up nearly 19% from the same period last year and exposing more than 10 million consumers to the threat of identity theft and/or credit card fraud, according to the Identity Theft Resource Center.

Since the EU recently completed its migration to EMV chip card technology, the region has seen an 80% reduction in credit card fraud while the U.S. has witnessed a 47% increase, according to Discover Financial Services.

With the outdated U.S. credit card technology, stealing data is easier than ever. While European banks have already made the transition from the long-standing magnetic stripe technology to EMV chip technology, U.S. banks and businesses have been slow to make the transition.

—Written by Ellen Chang for MainStreet

Show Comments

Back to Top