New ‘chip and PIN’ credit may cause confusion overseas

IF you are one of the millions of Americans heading overseas this summer, you may find confusion rather than acceptance when you try to use your credit card. And it will be up to you to set recalcitrant clerks straight.

The confusion stems from mandates by governments to card issuers (including American Express, MasterCard and Visa, both credit and debit cards) in foreign countries to adopt the “smart card,” also known as “chip and PIN” technology, for credit cards issued in that country.

They look like regular credit cards but store information in a small computer chip on the front instead of a magnetic strip on the back.

The card requires the holder to use a PIN number instead of scribbling his or her signature for every transaction.

I was in London in April, and the cards and the machines that accept them are everywhere -- even in Jimmy’s restaurant, my favorite old-time SoHo place to grab an inexpensive (by London standards) bite of good Greek food. There my friend Seamus and I put the new system to the test.

Seamus is a Londoner and has the chip and PIN card. We split the bill, Seamus paying with his smart card and me with my U.S.-issued Visa.

Our waiter easily handled Seamus’ transaction, inserting the card into a portable device, then handing the device back to him to punch in the PIN.

But when I tendered my old-style card, the waiter looked a bit confused. He quickly recovered, swiped it in the same machine and printed a copy for my signature.

Britain went completely chip and PIN in January, said Brian Triplett, senior vice president of emerging product development for Visa USA, but the old-fashioned card issued in the U.S. is still accepted anywhere Visa is accepted, Triplett said.

Travelers have encountered some confusion when they have tried to use a debit (not credit) card and were asked for a PIN number, said Simon Bennett, a spokesman for Chip and PIN, an organization whose goal is to educate retailers and consumers on the new card. American PIN numbers are not recognized for charge transactions (they do work for ATM withdrawals) so a transaction slip would have to be signed.

In major metropolitan areas such as London, I had no trouble with my card, other than a clerk’s occasional hesitation.

But once you’re out of major tourist centers, some personnel are unfamiliar with the dual system.

Paul Chibeba, spokesman for VisitBritain, the official British tourism agency, is based in New York and carries an American-issued credit card. Visiting London last month, he had no trouble, but once he was outside metropolitan areas, he encountered some resistance to his old-style card.

“It was really not a problem,” he said. “I just had to explain to them that they could take it.”

Part of the confusion is due to implementation of new rules to curtail fraud. The chip and PIN cards have been successful in reducing bogus transactions.

In Britain, credit-card fraud reached $914 million in 2004, and fraud was committed every seven seconds, according to Card Watch, the British banking industry’s fraud awareness organization.

Losses dropped by $117 million in 2005, even though the program had not been completely rolled out.

If a merchant doesn’t want to take a magnetic-strip card, the traveler needs to be persistent, Triplett said.

“Request the merchant to look into it,” Triplett said. “Don’t take that first ‘no’ for an answer.”

If the clerk still says no, go up the ladder and ask to see a manager.

Here are some other tips on credit cards and money if you are traveling abroad this summer.

* Use a credit card for major purchases at hotels, restaurants and other merchants. They come with important consumer protections that can help you in case of a disputed charge.

* Try to find a card that does not carry foreign transaction fees, which can add up to 3% to your total charges. As you will discover when you start hunting for a such a card, finding an online or other source for comparing these fees is difficult. Your best bet: Read the fine print on the credit card offer. And remember that those are subject to change.

* Make a photocopy or other record of the credit, ATM and debit cards you carry, along with the issuers’ phone numbers for overseas collect calls. This can assist you in reporting lost or stolen cards.

* Always carry a little local currency for incidentals and a few U.S. dollars just in case -- especially if you are traveling off the beaten path. Though your credit card is good, there is no guarantee that any particular merchant will accept credit cards, period.

I always withdraw $100 to $200 in local currency from the first ATM I see after I get to my destination. The exchange rates are, probably, the best you’ll find. In a pinch, U.S. currency is often accepted in many places that cater to tourists, though the exchange rate is frequently bad. Avoid hotels and currency exchange booths in airports and on the street. The exchange rates will be unfavorable and many of these tack on big service fees.

* Avoid exchanging foreign currency back into U.S. dollars. You get hit with fees on both ends of that transaction. Use the money to buy trinkets or, if you have a large amount, pay part of your hotel bill. (But remember that some countries require an exit fee paid in the local currency, so don’t spend all your cash, just in case.) I give bills and coins to my nieces and nephew as souvenirs.

Be persistent if a merchant balks at taking your old-style card. Tell him nicely but firmly that he is required by his agreement with the credit-card company to accept your card.

If you have difficulty with a merchant, you can report it at www.chipandpin.co.uk. There is little that can be done after the fact, Bennett said. But it might make you feel better.