Chip and PIN Credit Cards

You would think that the credit card industry would be concerned about this, because if the USA doesn't convert to chip and pin within a few years, it would seem there is a real danger that American credit card use in Europe will plummet.

The article also mentions that Canada is planning to change their ATMs to chip and pin only by 2012. If this should happen in Europe too, where will most Americans get their Euros? Few are going to want to go back to buying travelers checks.

Sounds like a disaster waiting to happen for the travel industry.

Just to clarify the details in Tyler's post, "Chip & PIN" credit cards are already being issued in Canada in increasing numbers, well in advance of the 2012 date mentioned in the article. At this point Banks only seem to issue the cards when existing cards expire, but they seem to be increasingly common. Although my existing VISA card wasn't due to expire unitl 2010, I requested a "chip card" prior to my European trip this year, and the Bank graciously provided one immediately.

The greater majority of merchants (at least in this area) have the new POS Terminals installed, but not all are completely set-up to process the new cards yet. I've heard of a few "bugs" with these but I haven't experience any problems yet.

Some financial institutions have indicated that the "Chip & PIN" debit cards will start rolling out in 2010.

So, what is keeping America from going with this system? Is it the expense of getting merchants to convert? Do American Banks and Merchants think that it's not significantly better? What are the factors that are causing our financial system to make a different choice than the European (and now Canadian) financial systems? PAm

I had two credit cards replaced with chip & pin earlier this year although the old ones had not expired and I did not request them. Only my Mastercard has not been updated. Many places in Edmonton have teh machines, though I was in Best Buy yesterday with my Scottish nephew and their machine was not yet working and he was perplexed by the need to sign the slip!

From a Google search, it's apparent that there are varying opinions as to how much better security chip and PIN actually provides. I'm no expert on the subject, but I would say that, given the technical sophistication of a lot of criminal elements these days, some of these crooks are going to find ways to steal your credit card information, regardless of the level of security any system supposedly provides.

The main reason US banks and merchants are resisting converting to chip and pin is the cost, plus they say that credit card fraud is not as prevalent in the USA as it is in Europe.

I'm not surprised that Canada is ahead of the game. The USA always seems to be behind in adopting new technology. Take broadband Internet for example -- they have faster connections in Japan and Europe than we do. Same for cell phone technology -- more advanced in Europe than here.

Rick Steves mentioned that we need to know the PIN in letter form instead of number form.
My question is: what letter is used for what number? Each number matches 3 letters. Therefore what letter is used for what number?

Sandra: Actually, what Rick says is the opposite of what you just said: In Europe the keypads don't have letters, like they do here (in the US, anyway), in Europe the keypads have only numbers. This isn't a problem except for a person who remembers her/his PIN by thinking of the letters--in Europe you need to know the numbers of your PIN.

The reason the US hasn't adopted chip cards is explained in the NY Times article: There simply isn't any economic advantage/incentive to do so. Counterfeit Credit Cards are a major problem in other parts of the world. For some reason it has never spread to this country. So why should US banks and retailers spend billions of dollars to fix a problem that doesn't exist. Such a tiny percentage Americans travel overseas it's not worth a bank's hassle to put chips on a card.

Not exactly on topic but perhaps someone can give me an answer to something that has puzzled me for some time.

In films and TV shows from the USA you see people giving their credit cards to other people for them to use. Does this happen and how do they get around the problem of matching signatures?

Thanks

"In films and TV shows from the USA you see people giving their credit cards to other people for them to use. Does this happen and how do they get around the problem of matching signatures?"

Technically, you are not supposed to give your credit card to anyone, but some merchants just don't bother to check the signature when you sign. That is why increasingly you will find merchants who ask to see your ID (like, your driver's license) when accepting your credit card. This is because they are liable if the card is fraudulent and they didn't check.

As to matching signatures, supposedly the merchant is supposed to compare the signature on the back of your card with the one on the charge slip, but they often don't do that. It's the same with banks and checking accounts. When you write a check, when the bank cashes it they do not look at your signature card on file to make sure it is your signature. The signature card is only in case of a claim -- like, if you lose your check book and somebody forges a check on you account, and you file a claim, then they take a look at your signature card.

Canadian banks (well, at least mine) are rolling out the chip debit cards now--I got mine in the mail a couple of days ago. I've had the credit card for a few months but haven't used it other than the swipe way.

Linda,

"In films and TV shows from the USA you see people giving their credit cards to other people for them to use. Does this happen and how do they get around the problem of matching signatures?"

I've never noticed anyone giving their credit cards to other people? Perhaps this is a situation where credit card holders arrange to have a supplementary card issued on their account? This would contain the name and signature of the supplementary card holder rather than the primary card holder. Not sure if this is what you were referring to, but it could be one possibility.

Cheers!

Never been to LA, other than through LAX, but I have had my signature checked 3 times in my life...all three right after I got married and had changed my name and I think I hesitated a bit to make sure I signed the right name. Never in the US (Boston, NYC, Vegas, Atlanta to name a few places) or Europe.

"In films and TV shows from the USA you see people giving their credit cards to other people for them to use. Does this happen and how do they get around the problem of matching signatures?"

It can happen. Not always for sinister reasons either.

There's the occasional automatic kiosk, such as gas stations which don't check. Also, at least locally, a surprisingly large number of grocery stores have stopped asking for signatures on credit card receipts for any purchase under a set amount ($25 seems to be common). And very few clerks ever actually ask to check your card.

Thanks for the replies. Among the examples I was thinking of were parents handing over their personal cards to their children. The only TV show that springs to mind is "Will and Grace" where a rich character gave her card to one of the others to go and buy something to cheer themselves up. I thought maybe it was for comic effect but after seeing it done on other shows thought that it could be more commonplace.

To get back on topic, here is a piece from the BBC News website about a fall in credit card fraud in the UK but an increase in fraudsters targetting foreign credit cards.

http://news.bbc.co.uk/1/hi/business/8293523.stm

"In films and TV shows from the USA you see people giving their credit cards to other people for them to use. Does this happen and how do they get around the problem of matching signatures?"

My dad has one of those Citibank cards with his photo printed on the front. In spite of that, I've used his card before (with his permission, of course) without problem. He's 86 and I'm in my early 50s. There may be a family resemblance, but not enough that his photo would pass for a picture of me.

Having said that, more and more places are requiring customers to show a photo ID when using a credit card.

Is there any place to buy a refillable card that has chip and pin technology that we could fill in the USA and carry with us abroad?

You can only purchase pre-paid debit cards with chip&pin in Europe. You can easily purchase them at most any currency exchange desk at the airport...like Travelex.

In the past prepaid card have had some major fees, other in the range of 10 to 12%, built into the cards. If you are going to use a prepaid card be absolutely certain that you understand the fee structure and how the exchange rate is determine. Prepaid card do not fall with the regulations for standard debit and credit cards. They are viewed as gift cards and are a different ball game.

The NY Times article discusses fees for prepaid cards issued in the USA. I suspect these cards are more regulated in the EU, and are a better deal if you purchase them across the pond. Here are the terms and conditions for Travelex cards purchased in the UK:

http://www.cashpassport.com/1/en/uk/

It says somewhere else on the Travelex site (in big print) that there is no ATM fee. The other charges (cashout and inactivity) are easily avoided by simply spending the money on the card.

Getting back to the CHIP and PIN credit cards--in my experience, it is the smaller stores and businesses that have the POS readers for CHIP cards. The big chain stores don't--that includes Canadian ones, not just the American ones up here! ;-)

Just back from Italy where we used a UK issued prepaid debit card to get cash from ATMs. We did not use it as a payment card, we prefer to use credit cards for higher value payments.

It is a no fee Euro currency card which we loaded with our spending money. The exchange rate we got when loading the card was competitive, certainly way better than our High St banks! If we use our usual UK debit cards abroard our banks charge both an exchange and transaction fee when withdrawing cash from ATMs. Pre-paid cards could seen as a modern version of travellers cheques for carrying cash without incurring the, usually high, bank encashment fees.

Edit - meant to say it is a Mastercard "badged" card. They do warn against using it as security when first checking in to a hotel or renting a car because of the practice of "blocking" sums of money. They advise using a CC to do that and then, if you prefer, to use the debit card for the actual payment.

First, is there an easy way to find a prepaid debt card with no or minimal fees? IE, some website that compares various cards.

Second, does anyone know of a US credit card company that does NOT charge a fee for use of the card internationally? Chase charges 3%, ditto Bof A, and AMex 2.7%.

Last, any way a US citizen can just apply for a credit card from a European issuer? I'm going to be travelling 3 months and would like to avoid the hassles everyone is talking about. Can I open a European bank account, wire transfer funds to it, and use their ATM card? Anyone know a good bank for doing this? Is the exchange rate for doing this in one chunk likely to be a lot worse than the exchange rate on a per transaction basis with a US credit card/atm card?

"Last, any way a US citizen can just apply for a credit card from a European issuer? I'm going to be travelling 3 months and would like to avoid the hassles everyone is talking about. Can I open a European bank account, wire transfer funds to it, and use their ATM card? Anyone know a good bank for doing this? Is the exchange rate for doing this in one chunk likely to be a lot worse than the exchange rate on a per transaction basis with a US credit card/atm card?"

This is a complicated issue. It is possible to open an account at some European banks, but it's a lot of trouble, and many banks will not give an account to a non-resident. For example, Citibank in Spain will give you a checking account (in Euros) with a debit card that can be used for purchases and withdrawing money from ATMs. I know, because I have such an account -- but I applied for it in person in Barcelona. It's harder to apply by mail.

Lloyds Bank International and HSBC International will also open Euro accounts for non-residents. These are known as "offshore" accounts. There are monthly charges and minimum balances, however, that you need to be aware of.

My Citibank Spain account is free, if I maintain a 3,000 Euro balance. Not bad.

As to funding your account, best way is to open an account with XEtrade, in Vancouver, Canada. They sell Euros at a better rate than US banks do, and they will do a free ETF transfer for you to your new Euro account.

As to credit cards, it's virtually impossible for an US resident to get a European credit card, because you don't have a credit history in Europe. American Express, in the UK, has a Euro card that they will give to US residents, but it has a 100 Euro annual fee. Pretty expensive, plus, AMEX isn't very accepted in Europe.

Susan, there is no such thing as a prepaid debit card with no fees. Prepaid cards in general have lots of fees. As far as credit cards go, Capital One charges no additional foreign transaction fee. And though I have no personal experience with it, it has been reported here that it is virtually impossible to open an account in a European bank without being a resident of that country.

In short, a regular ATM card tied to a checking account is your best bet for cash. For credit, it's Capital One.

"..opening up an account in a foreign bank..

Good luck. Besides all the hassles, you are playing the foreign exchange game doing that. You can't time that market effectively to save more than paying all the fees and hassles for wiring funds."

It is possible to save money with a foreign Euro account, but only if the Euro continues to go up after you have bought your Euros. In may case, the Euro went up significantly, so I saved money on foreign exchange.

"Best bet is to open a free brokerage account at Schwab ..."

I have an account with Schwab. Their two percent cash back on credit card purchases is a good deal.

I don't see a chip on the Schwab card. This question remains open for me--how do I rent a Vélib, or use a metro station with no attendant and no coin acceptor, without a European (or Canadian) Chip and PIN card? This goes beyond the basic inconvenience of being turned down in a restaurant, where I have the option of arguing with the waiter or paying cash.

In Germany, at least, there is something like a prepaid debit card with a chip in it, called a Geldkarte. You can load it at many banks, including the ubiquitous Sparkasse, and possibly from automats that accept swipe cards. The only problem is the maximum amount is €200, but it would be good for those automated gas stations and for some transit ticket machines. I don't know if systems like MVV still take regular chip or swipe cards, but they do take the Geldkarte and are giving a discount for plastic payment.

I think that the Geldkarte operates on a 0.3% commission, paid by the seller. Of course, you take the foreign exchange "fee" when you load the card.

The reason it is taking so long for EMV cards to come to the U.S. is that credit card companies have been willing to tolerate mag-stripe related losses. Switching to EMV would cost U.S. issuers about $3 billion, according to one estimate, and merchants would have to pay not much less to upgrade their point-of-sale equipment. Now that Visa has made it mandatory for all U.S. processors to support acceptance of chip-based transactions by April, 2013 (http://blog.unibulmerchantservices.com/nfc-ascent-pushes-visa-to-speed-up-adoption-of-smart-credit-cards), the dynamics have changed completely. The banks have no option but to build the infrastructure, so once that's done, they might as well start using it. After all, if the U.K. chip-and-PIN experience is anything to go by, switching to it would result in hundreds of millions of dollars in savings from lower fraud losses. U.S. banks would certainly take the windfall if it comes their way.

J., it is interesting that the blog post you listed gives as the reason behind VISA's decision the rise of NFC-equipped payment devices. The main such device is the new class of smartphones that have just arrived or that will be coming soon. I'm sure VISA's thinking was that they didn't want to lose out if customers started shifting transactions to some system run by the cell companies or a competitor simply because the customer's VISA cards didn't offer the same convenience. I wonder if the European system will work with the NFC cell phones? I could easily see how the U.S. consumers would switch to using cell phones as credit cards and then get to Europe and discover that they still needed an actual physical credit card. The helpline would switch from posts titled, "Will my credit card work in Europe," to ones asking, "Will my cell phone work as a credit card in Europe?"

NFC is very similar to the paypass technology already widely used in many parts of the US and a few spots in Europe. I've successfully used my paypass debit cards in the UK, Switzerland, Istanbul, and Hong Kong...so the technology should be compatible worldwide. On a side note, I was at my local mall yesterday, and noticed that all the soda machines scattered across the mall had paypass readers. So to purchase a Coke all I had to do was press my wallet across the reader...felt like I was in Tokyo;) Here's a NY Times article about NFC: http://tinyurl.com/6y3welz