Credit card differences

I was planning to write today about the problems sometimes encountered by Americans when they try to use their US credit card in Europe. As fortune would have it, I experienced exactly the reverse yesterday: Trying to use a German card in the US.

I was helping a German friend who is visiting us in the US use his credit card at a gas station. He inserted the German Deutsche Bank MasterCard into the gas pump. First he had to choose credit or debit. It’s a credit card, so he chose credit. Then a message appeared that I’ve seen a lot at gas pumps during my US travels lately: “Please enter your ZIP code.” Well, a German Postleitzahl is the same length as a US ZIP code, so he tried that. “Please see the clerk” was the machine’s response. We tried debit also, but it wanted a PIN that didn’t work. So it was off to see the clerk.

We were able to get the German card accepted with the clerk handling the transaction (and showing a German ID), but we had to guess how much gas we needed. If it was less than that amount, we would have to return to have the clerk enter a refund of the difference. Luckily, we guessed about right and did not have to do that. But the entire experience was a hassle caused by the differences in the way US and German credit cards function.

Basically, American credit cards are out of date (überholt in German). They still use outmoded magnetic-stripe technology introduced in the 1960s, while the Europeans have adopted “chip-and-PIN” (EMV) cards that offer more robust security. The European Payments Council, which regulates the Europewide market, recently announced that it may ban magnetic-stripe cards within the next couple of years, putting in doubt the future of US credit cards in Europe. Completely overhauling the US credit card system will be a major undertaking. (But see update below.)

Update: On 9 August 2011, Visa announced its effort to convert its US credit cards to the chip-and-PIN system and to phase out “mag-stripe” cards. Visa set a deadline of April 2013, by which time merchant transactions must use chip-based cards. The card issuer also wants to move towards the “mobile wallet” for cell phones in the US.

Although a few financial institutions in the US have introduced small numbers of harder-to-counterfeit chip cards, most US MasterCard, Visa and American Express cards still have a magnetic strip and no chip. (By the way, that chip-like thingy on your Amex Blue Card is not the same thing, and that card still has a mag-strip.) Canada, Europe and much of the world beyond the US long ago moved on to a more secure credit card technology that uses an embedded computer chip to enable transactions. Card transactions in the US are done live, online, while in Europe they are offline and completed at the end of the day. Problem areas for US card users are gas pumps, metro stations, parking lots, ticket machines and sometimes cashier stations that are not equipped to handle magnetic-strip cards. As I discovered today, the same problems can occur in the US with European EMV credit cards, even when they also have a magnetic strip.

Germans and other Europeans generally use credit cards much less than Americans do. In fact, Germany has the lowest rate of credit card use in all the EU! (And German “credit” cards are really charge cards, paid off in full automatically at the end of each month.) Deutsche Bahn, the German railroad, did not even begin accepting credit cards until 1992! (Today you can pay the conductor in a moving train by credit card.) Although the situation has improved in recent years, Germany is still not a place where you can take credit card acceptance for granted. The fact that Visa and MasterCard claim that no business can refuse your American card is little comfort when your card won’t work at all, is refused or rejected.

However, here are five tips to help avoid credit card problems in Germany and Europe:

1. Buy Online
Use the Web to buy air and rail tickets, and other things you need for your trip. Many German, French and other European websites let you use your credit card for purchases. You also don’t need to worry about having your magnetic strip read correctly, since you enter the data yourself.

2. Get Cash from an ATM (Geldautomat/Bankomat)
There are ATMs all over Europe and Germany. Every bank, even in small towns, has ATMs inside and usually outside or in a lobby that you can access with your card. Your 4-digit PIN and a credit/debit card will get you euro cash in any amount up to your daily limit. Unlike many in-store cashier stands, automatic teller machines have no problem with American credit or debit cards. With cash in your pocket (withdrawn from an ATM), you don’t have to worry about using plastic, and you have a backup plan when you do. Warning: The only problem with cash is high-denomination bills. Avoid 100-euro notes, which are often refused out of a fear of counterfeit money. Most ATMs issue a variety of bills, none larger than 50 euros.

3. Have More Than One Card
Don’t leave home without it – a second or third card, that is! If your Visa card won’t go through, your American Express may (or vice versa). Have a backup card or two. A debit card should always be tied to a checking account (not savings). Many travelers avoid possible card-rejection problems by notifying the credit card company in advance that they will be using the card overseas. If you didn’t call in advance, use your card for a few smaller purchases in Europe, so any larger purchases won’t get flagged later. If you don’t do that, radical changes in your card use can trigger non-approval of purchases caused by the credit card company’s tracking.

4. Get a Special Wells Fargo or JPMorgan Chase EMV Credit Card
If possible, try to get a chip-and-PIN credit card issued by Wells Fargo, JPMorgan Chase and some credit unions. Those financial institutions have issued a limited number of EMV cards to customers who travel internationally. Such cards should work without any problems in Germany and Europe.

5. Ask for a Second Chance
If your US card is rejected the first time, ask the cashier politely but firmly to swipe it through the reader again. Often a second attempt will work. At a gas station, go inside if the pump won’t read your card. Some European cashiers may not be familiar with how to swipe a US card. If that fails, go to a backup card or cash. NOTE: Chip-and-PIN card readers also have the ability to read a magnetic stripe!

To summarize… Always have cash on hand. You can get cash with a US credit/debit card and your PIN at any European ATM. Don’t rely on just one card. Ask for a second chance if your card is rejected. Consider some other options, such as the new chip-and-PIN cards issued by some banks.

One thought on “Credit card differences

  1. I concur with everything you said so far. I think steps #1 and #2 have helped me through when I was in Germany. Thank goodness for Geldautomat in Germany. I never had to use my credit card when I was there, but I had it with me just in case… I think the new credit cards with the “chip and PIN” scheme are relatively safe, but I bet there’s someone out there willing to find a way.

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