6 credit card tips for foreign travel

Assorted credit cards

If you’re taking a trip outside of the United States, expect to have some trouble if you use your debit or credit card.

That’s because most countries have moved away from the credit cards Americans carry.

Instead of having magnetic strips on the back of cards to conduct transactions, they use embedded microprocessor chips, a technology known as "chip and PIN."

A 2009 survey done by the Aite Group, a financial research firm, found that a majority of cardholders surveyed who had traveled outside the United States in the past three years had difficulty using U.S.-issued credit cards on their journeys.

The good news is that overseas ATMs typically accept magnetic-strip cards. But if you’re not near an ATM and running low on cash, you might have a tough time.

If you’re using a rental car, gas pumps, parking garages and tollbooths don’t accept magnetic-strip cards. And even though most European cash registers can handle American cards, some cashiers may not know how to process them.

What does that mean for American travelers?

Follow our 6 smart moves, and you might just save yourself some aggravation.

Smart move 1. Try to use your credit card anyway.

Politely insist the cashier keep trying to swipe the card because the reader may still be able to recognize the magnetic strip and approve the purchase. Carry a few cards just in case one doesn’t work, because the other one may do the trick.

Smart move 2. Skip automated machines; find the attendant.

Because the machine may not recognize your card, find a live person to swipe it through.

Smart move 3. Consider buying a chip-embedded debit card.

Travelex, the currency-exchange company, recently started selling a preloaded EMV-chip (for Europay, Mastercard and Visa) debit MasterCard called Chip and PIN Cash Passport, which is available in pounds or euros.

There’s no fee to buy the cards, but the exchange rates used to load the card with cash aren’t great. The rate currently hovers around $1.50 to the euro. By contrast, the exchange rate charged by banks was closer to $1.40. So you’ll pay more for the convenience.

Smart move 4. Carry cash.

Remember that your magnetic-strip card will usually be accepted at an ATM machine anywhere.

But also remember that using that Visa or MasterCard may incur a foreign transaction fee, which could be anywhere from 1% to 3% -- not to mention that your bank may charge an additional transaction fee on top of that.

Smart move 5. Buy purchases online beforehand.

Consider buying the rail tickets and airline tickets you’ll be using on your overseas trip before you arrive there. For example, Rail Europe, which lets American tourists buy many European train tickets in advance, recently added local British train tickets to its online offerings.

Smart move 6. Tell your bank about your travel plans.

Alert your bank before traveling internationally. If your bank sees unusual activity and multiple swipe attempts, it might freeze your card as a security measure.

"It’s also a good time to ask your bank when it plans to offer chip-and-PIN technology," says Randy Vanderhoof, executive director of the Smart Card Alliance, a nonprofit group trying to promote chip-and-PIN use in the United States. "Or let them know about payment problems you had on your trip once you return."

That might be the best way to motivate U.S. banks to get onto the same page as the rest of the world.

The future of credit cards?

Instead of being swiped, chip-and-PIN cards are inserted into a reader into which the user enters a PIN number, similar to what we do with debit cards. They are widespread in Europe because they are considered more secure.

"With magnetic-strip cards, the information can be stolen off of them fairly easily," Vanderhoof says. "Chip-and-PIN has an extra layer of security because they require a PIN for authentification and they’re harder to counterfeit."

Chip-and-PIN is becoming a standard in Asia, Latin America, even Canada.

More than 130 countries have adopted the technology. Among the top 20 industrialized nations, the United States is the lone holdout.

This card type has been slow to catch on primarily because retailers balk at the cost of installing the card readers needed to process them at the checkout line. (Chip-and-PIN is different from the radio-frequency technology used in credit cards like the American Express Blue card, which is waved in front of a checkout scanner).

But as credit card skimming and fraud are becoming more of a concern in the United States, more banks are coming around to chip-and-PIN.

Some prime examples:

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