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Using Credit Cards in Foreign Countries

If you’re heading outside of the United States this summer, get your plastic ready. And if you haven’t been out of the country recently, you’ll find some changes—some to your benefit, some not so good.

Basic rule. The longstanding basic “rule” remains valid: Put your big charges on a credit card and use an ATM (debit) card for the local cash you need. Even with the fees, you lose less on foreign exchange using plastic than by exchanging currency. But some details have changed.

Chips Ahoy

Most of the developed world outside the U.S. has already switched to “EMV” cards that use an embedded chip to contain account information, while issuers in the U.S. have stuck with the magnetic stripe. Chip-card issuers outside the U.S. have also adopted a system that requires users to enter a PIN rather than sign a chit for personal verification. Almost everybody considers the chip-and-pin system to be more secure than the old stripe-and-signature system.

  • Most U.S. credit card issuers plan to switch to chip-enabled or “EMV” cards by October, but your bank may not issue a new card in time for your trip. Many travel-oriented cards are now available with chips, and rather than wait for your bank to issue a new card, you can request an updated chip card. Your bank may not accommodate you, but you can certainly ask.
  • Most U.S. card issuers have opted for a hybrid chip-and-signature system rather than chip-and-pin, which, the experts say, is less secure than pin cards. As a result, you may encounter compatibility problems even with a chip card. Apparently, the most serious problems occur when your only payment option is an unattended vending system. For the most part, your older signature credit card, stripe or chip, and magnetic-stripe ATM card will be accepted anywhere you interact with a salesperson. And in my recent overseas trips, I found most automated vending systems accepted my chip and stripe signature credit cards, and most bank ATMs accepted stripe debit cards.
  • Only a few U.S. cards are chip-and-pin. Among them, says, are some credit cards from Barclays, Wells Fargo and Synchrony, along with a few debit cards.
  • Recently, when a reader tried to buy a ticket online, the Norwegian Railway website refused his credit card because of “inadequate security” on U.S. cards. Instead, he had to use PayPal. I have no idea how widespread this problem is, but if you aren’t already signed up, PayPal can be useful when you run into credit card problems and for sending money. It does, however, add a foreign exchange surcharge of about 2.5 percent.
  • More No-Surcharge Credit Cards

    You’ve probably noticed that more and more credit cards feature either no foreign transaction fee or a fee of only 1 percent to cover conversion costs by the MasterCard and Visa networks. If you don’t already have such a card, check with the various card comparison websites for a card that best meets your needs.

    Airport ATM Exchange Gouge

    Most large airports I’ve visited in Europe lately have replaced ATMs operated by legitimate banks, such as Barclays, Deutsche Bank, or PNB, with ATMs operated by foreign exchange companies. They prominently feature signs claiming “no withdrawal fee,” but instead they hit you with a really bad exchange rate—as bad as you get at the nearby exchange counter. Before you plan to use an airport ATM, check with your system’s online ATM locator to find ATMs operated by legitimate commercial banks, even if they’re outside the main terminal.

    Global ATM Network Loses Edge

    Banks really hate to give consumers a good deal. So the Global ATM Network, which previously allowed Bank of America account holders to get foreign currency in much of the world with neither a fee nor an exchange surcharge, now charges a 3 percent conversion fee. And that means you’re better off with a debit card from one of the banks that absorb some or all foreign ATM transaction fees, including Ally Bank, USAA, several investment firm checking accounts, several online banks, and many small banks and credit unions.

    Ed Perkins on Travel is copyright (c) 2015 Tribune Media Services, Inc.

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