Using your credit cards overseas: An American headache

Question: What’s the latest on Chip and PIN cards?

Answer: Usually On the Spot doesn’t pose its own questions just to answer them, but several readers have inquired about this credit card issue, which can trip up international travelers.

The background: Most U.S. credit cards have a magnetic stripe. When a merchant swipes it, account info is transmitted. (In older incarnations, a device that made an imprint was rolled over your card.) You signed your name, and that was the end of it — until thieves developed the technology to read the card swipes or, in that older incarnation, learned to forge your name or, in an even older incarnation, stole the carbon copies of the transaction. Credit card fraud became a multibillion-dollar industry.

Enter Chip and PIN. A chip in your card transmits data, and you verify your identity by using a personal identification number. You may also encounter EMV, which stands for Europay, MasterCard and Visa, offering similar technology. These smartcards are becoming the standard in Europe, Asia, Africa and Latin America.

Notice that the U.S. is conspicuously absent from that list, and that’s where the trouble comes in for travelers. Although many foreign merchants have the capacity to process both kinds of cards, some do not or will not. And then there’s an issue with automated retailers, such as those ticket-selling kiosks you find in a train station.

So the billion-dollar question is this: Where can you get the new smartcard credit cards? Until recently, the answer was nowhere. You could get a smartcard debit card from certain organizations (Travelex and, if you were lucky enough to be a member, the U.N. credit union) but not a credit card.

Now card companies are taking notice. Among others, you can try Chase’s J.P. Morgan Palladium (the number and signature are etched into palladium, a rare metal, which tells you it’s for the high-end traveler) and J.P. Morgan’s Select Visa Signature Cards. U.S. Bank is testing FlexPerks Travel Rewards Visa, and Wells Fargo also has a pilot program testing the smartcards.

Even though the card conundrum has been lurking for several years, the last six months have been a comparative tsunami of activity, so why now? Credit card companies “are starting to hear from customers as they are running into the problem in Asia and the rest of the world,” said Janna Herron, a credit card expert for Bankrate.com, a personal finance website.

It would make lives easier if the U.S. adopted the smartcard technology, of course, but that probably won’t happen for some time, Herron said. “We have an older card infrastructure,” she said. “And there’s a lot of cost associated [with changing], from the retailer’s and the card issuer’s point of view.”

Another disincentive, Herron noted: “Lots of advocates talk about the increased security of EMV-enabled cards, but from the consumer’s point of view, their liability for a credit card fraud is very low by law” on U.S. magnetic cards.

Ultimately, the smartcard credit card snarl may be moot as smartphones begin to replace cards.

But they’ll never replace smart travelers, who keep themselves covered by using a variety of financial tools, including traveler’s checks (may not be accepted but can get you out of a jam), debit cards (many now charging currency conversion fees) and credit cards (also charging conversion fees and some of which may not be accepted). And then there is always cash, which isn’t as secure, isn’t always easy to convert but generally is welcome.

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