Chip-and-PIN Credit Cards Defined and Explained:
A Chip and PIN credit card does not appear to be much different from a standard card, except that you won't see a magnetic strip on the back. You also won't see the chip, which is inside the card. It stores a personal identification number (PIN). Instead of swiping the card and signing for a purchase, the card holder punches in the PIN.
The Chip-and-PIN cards (sometimes called "Smart Cards") are designed to prevent credit card fraud. Magnetic strip cards can be "cloned" using a technique called skimming. This had become such a widespread problem in Europe that the chip and PIN technology was gladly accepted.
Chip-and-PIN Credit Card Countries:
Although the technology first took hold in the United Kingdom, it has since been accepted in other parts of Europe, as well as Asia, South America and even North America. Canada has been moving toward a chip-and-PIN system for several years, as are banks in Mexico. About 50 countries are working with the technology.
Results vary, but fraud has been prevented because of the new technology. Cloning cards with chips is impossible, as is forging a PIN.
U.S. Switchover Slow and Costly:
The U.S. has not experienced the level of skimming and credit card fraud found in other countries. The New York Times quotes a Javelin Strategy and Research estimate of $5.5 billion USD to convert all cards in the U.S. It is estimated much of that money would go for new payment terminals.
Bank of America cards and Citi Hilton HHonors Reserve cards are being issued with chip-and-PIN technology. Social media movements are underway to gather public support for changes that will tighten security and help Americans avoid problems when traveling overseas.
Chip-and-PIN: Impact on Budget Travel:
American travelers abroad who stay in five-star hotels and deal with human cashiers at point of sale usually find the chip-and-PIN impact minimal. Problems occur at automated points of sale -- places budget travelers are more likely to frequent.
If you'll be buying train or local mass transit tickets from an automated machine, it is possible your card will be rejected. Even some human clerks will simply refuse the card, thinking it will not work.
But that is not always true. Urge a clerk to swipe the card anyway. Some travelers simply explain the card is "swipe and sign" rather than chip-and-PIN. Popular tourist areas that see American visitors will be less of a problem than more remote locations -- again, the kinds of places independent travelers often visit.
Ways to Cope with the Chip-and-PIN Problem:
- Carry additional cash
This is far from an ideal solution. For security reasons, it isn't a good idea to travel with large sums of money. Travelers should already be using a money belt to keep cash out of the reach of pickpocket thieves. That strategy is all the more crucial to your personal security if you carry additional cash.
- Avoid automated points of sale
Easier said than done, because most budget travelers depend upon ATMs and automated vendors that take credit cards. Try to make purchases for train passes and other such transactions online or at least in advance if possible.
- Request a PIN number for your credit card
This does NOT create a true chip-and-pin card, but it could speed the process of getting your card approved at point of sale in a country where a PIN is commonly used. Once you have the PIN, simply request that the card be processed manually. Some will protest, but technically, it is something they can and should do for you--especially if they want to be paid.
- Know how prevalent chip and PIN has become at your destination
The United Kingdom has done the most with chip and PIN technology. It is in widespread use. Canada is making the transition, but chip and PIN cards are far less pervasive there than in the U.K. Other countries such as Italy, China and India are also moving in the chip and PIN direction. Consult updated information for your destination.
- Watch for an alternative that international travelers can use
A chip-and-PIN credit card system in the United States is not likely anytime soon. But some companies are working on a chip-and-PIN debit card that could be loaded prior to departure and used by Americans in other countries.