Why American Credit Cards Suck
If you prefer to use a credit card when traveling abroad due to safety and better exchange rates, bad news. Other countries have adopted smartchip technology in their bank cards, and soon we Americans may be forced to use cash when traveling.
Smartchip technology is sort of a banking equivalent of the metric system—it's superior to magnetic stripe cards, every other country is using it, and the American banking system simply isn't interested.
Twenty-two countries, including much of Europe, Mexico, Brazil and Japan, have adopted the technology, according to the Smart Card Alliance, a nonprofit association that promotes chip cards. About 50 other countries are in various stages of migrating to the technology in the next two years, including China, India and most of Latin America, according to the association.
In the last year, Canada began rolling out chip-and-PIN cards and plans to stop accepting magnetic stripe debit cards at A.T.M.'s after 2012 and at point-of-sale terminals after 2015.
These governments like the cards because they reduce fraud. With an embedded microcontroller, large amounts of data can be stored on the card itself rather than in a central database, and counterfeiting such a card is difficult.
Canada, nooooo!
We understand that American banks have enough problems right now, and tourists' ability to buy train tickets or rent bicycles at a kiosk is not high on their list. So consider this a travelers' advisory instead of a consumer complaint.
For Americans, Plastic Buys Less Abroad [NY Times]
(Photo: Ciaran McGuiggan)
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Yeah I have an RBC chip debit card...for some time now. It still swipes most places, however, as merchants are slow to enable their chip readers.
I haven't been able to find an explicit answer to this question online, but I think that Americans can get overseas credit cards. I know that I get all sorts of credit card offers from the non-US miles programs I belong to.
It completely should be a consumer complaint.
"American banks have enough problems right now" - but they still find ways to make up new and interesting fees. Imagine if they focused some of the energy at the fee brainstorming table toward serving the consumers. Alas, it's just wishful thinking.
BTW, you owe me $35 as a convenience fee for my posting of this comment.
My alma mater had SMART chips in their ID/debit cards for a while. The cash chip was used to... and that's why they stopped it. I forget what it was for, it was some sort of non-bank way to pay cash for things. I think someone just pulled a monorail on them and sold them the technology claiming it would be awesome, but it just didn't get used very much.
I don't see how having the info on the card is more secure than a database. Damage/lose your card and your balance disappears? Hack the chip to find out the PIN? Maybe they're safe from skimmers, but criminals will invent a new kind of skimmer.
What are you talking about. We should definitely not cut the US banks any slack. Its just like how they still charge non customers for using atm's. Its classic US bank bury your head in the sand and only change once they are forced. Just no innovation.
I went back to the UK a few months ago and got looks of confusion and disgust everywhere I tried to use my credit cards. Half the time I had to tell cashiers, "it's not a chip card, sorry" as they tried to valiantly to prove otherwise.
I lived in the UK for a year, and did my banking with Lloyd's. I loved the chip and PIN interface. When I moved back the states, it took me a while to get used to the old fashioned way of doing things. Plus, it sucks to have to sign for everything. No need to sign when you've got chip and PIN.
Thanks for the heads up, Consumerist!
In 2002, I went to Washington, DC on a business trip, and due having been caught in the dot-com bust, I went without a credit card, just a Wells Fargo ATM card backed by several thousand dollars in the account. Before going, I called, and was assured by Wells Fargo that my debit card would work in ATMs there. But... they'd lied, and the nearest ATM that would take their card was in Wheeling, West Virginia, hundreds of miles away.
It was pretty damn annoying to look forward to a week in which all I had to eat on was eight dollars that happened to be in my wallet. (Repeated escalation got them to fix the problem, but it's one of the many reasons I loathe Wells Fargo - lying is standard practice there.)
Finding myself in a similar situation in a foreign country wouldn't just be annoying, it would be downright frightening. I would be royally pissed. It would be enough to induce me to change banks.
@bobert: Funny, I had no problem using my Wells Fargo ATM (not debit) card at any cash machine in Washington, DC during that same time period, and many times since then. Of course, I had the peevesome burden of paying third-party ATM fees, but it worked.
I forget when the UK switched over to chip & PIN - I think it was 2005, though. I moved to the US in 2007, and went back for my first visit this year. Many, many retailers, restaurants, etc seem to have become VERY strict about ONLY accepting chip & PIN cards now. For every store or restaurant where the staff are happy to key in your credit card number manually and let you sign (thus bypassing the card reader in which non chip & PIN cards won't work) because they understand that credit cards issued in the US just don't have that technology yet, you'll find another that outright refuses to accept the card. I was glad I took my old UK debit card with me (and that I had some money sitting in my checking account over there), but it was a total pain in the arse, to be honest. Good call, Consumerist - if I (someone who comes from a country that switched to chip & PIN years ago, while I still lived there) was caught short when I found I couldn't use my US credit card in so many places, it's going to come as a very unpleasant surprise to someone who's planning on putting the majority of their spending while travelling on a credit card. We took a certain amount of cash with us, but I would have exchanged a whole lot more of it had I known what a PITA it would be trying to use my US-issued Visa.
@l951b951:
How is chip and PIN serving the consumer? The only benefit is to the credit card companies, since it's a tool to reduce fraud, and that's a cost burden THEY carry, not the consumer.
How is the lack of chips a lack of "innovation?" It's "innovation" that only benefits the card companies, not the consumer.
@morlo: The database is potentially 50 million cards and details. The individual card is one individual even if it is painful and inconvenient. Dealing with an entire database has the possibility of millions or even billions in costs and losses. The biggest issue of upgrading is the retailers having to pay for their upgrades, as we are currently seeing in Canada. The banks have done their upgrades but the need to wait for the market to catch up.
AmEx Blue actually originated as a smart chip card... they have since gone BACKWARDS, switching to a way, way less secure RFID embedded card.
I still have a USB smart chip reader that AmEx provided to Blue customers for free. Of course, it's useless now; all of the AmEx proprietary utilities that used it have long since gone away, along with the smart chip version of Blue.
Okay, dumb question: Does my "Blink" card from Chase have the necessary chip, or is that something completely different?
I ran into this same issue when I traveled to England a year ago. I had to find an ATM at the airport because no shop would take my card as it didn't have a smartchip.
@morlo: Having the PIn on the chip is redunculous. What the chip does is just store a local copy of transactions at the same time the central database has a copy. In cases of fraud, if they match up, the Cx has some explaining to do.
@NeverLetMeDown:
So fraud is no inconvenience to the customer? If thats true, can I have your bank info? I have some money I need to move out of Unspecifiedistan on behalf of the royal family.
@halsnook: No. Blink is an implementation of RFID, or Radio Frequency ID. RFID allows a short range radio frequency signal to read the data on the card, all contactless.
This article is referring to a credit card embedded with a smart chip, such as the one in the picture attached to the blog entry above. (A smart chip is basically the same thing as that used on cell phone SIM cards.) A smart chip requires a card swipe's read head to make contact with the chip to read the data on it.
I have already experienced it first hand when foreign merchants won't accept my US credit card because they will only accept cards with micro chip. Their newer machines won't read magnetic strips, period.
@LoadStar: Ha ha, me too. I'd been looking for tips on hacking it to maybe get into my cell's SIM or those satellite cards. :)
Rubbish.
UK retailers still accept non "chip and PIN" cards
[www.chipandpin.co.uk]
You still have the usual encounters with the usual dim-witted shop assistants, but given that most of the world hasn't migrated to the new platform yet, it's a no-brainer.
2012 is three years away.
This is yet more evidence that "globalization" is a complete and utter scam. While American companies constantly beg for deregulation and tax cuts because of the bogeyman of "globalization", not a single major American corporation is the least interested in the global realm for anything besides screwing the American worker. Metric system? Chip and pin? International roaming and cellular bands? Ethanol? National health care? We could make a list of the things that the rest of the developed "global market" is doing that American companies don't care about. The only one they do care about is outsourcing.
It's not just about "dim-witted shop assistants", believe me. Plenty of shops, restaurants and bars in London have signs posted on their doors announcing that they ONLY accept chip and pin cards. That's a decision made by the management, and they clearly don't care about the fact that they could accept non-chip & PIN cards if they wanted to.
I think it's a definite benefit to the consumer when it comes to debit cards. I'd rather not have my bank account drained of all cash, thanks.
@morlo:
There are skimmers for smartchips that can steal data without you even taking the card out of your wallet.
Ah, I encountered those looks of disgust, too. Plenty of filthy glares accompanied by "THIS ISN'T CHIP AND PIN!!" in an accusatory tone.
Lets not over exaggerate now.
"The chip-and-PIN technology usually isn't much of an issue when making purchases at a store, or paying for a meal in a restaurant, as most of those merchants still have credit card terminals that can read the magnetic stripes. Likewise, A.T.M.'s typically recognize and accept many cards whether they have a chip or a magnetic stripe."
@MsAnthropy:
I also lived in England a year (outside of London, was there at least every other weekend) and never had an issue with my non-chip-and-pins. I did, however, usually bring cash because England is the land of "You must buy more than 10 GBP of stuff to use that or there will be a 2 GBP charge."
@krom: Because if you ignore the E.U., Japan and China, the US market is bigger than the rest put together? Conclusion: USA makes its own global markets at home.
@Coles_Law: No. This article isn't even talking about RFID cards; it's talking about Smart Cards. See the gold chip in the photo? Those are the contacts for the Smart Card reader. Physical contact required.
@NeverLetMeDown: Companies never "carry" a cost burden. They pass it on to their customers.
Maybe - just maybe - if they didn't lose billions annually to fraud, they wouldn't be so quick to raise interest rates and fees in order to make money.
Yeah, that last part is wishful thinking.
@Bruce Bayliss: "2012 is three years away."
When you're talking about countrywide infrastructure, three years is the blink of an eye.
@Bruce Bayliss: 2012 is three years away, and that website is three years out of date. Look at the upper right corner of that page: "As of 2006 this site is no longer being updated."
If three years is enough time to change US cards to be chip and pin compatible (as you assert), then it's certainly enough time for shops in other countries to stop accepting magstripe cards.
The laundry cards issued by my apartment complex have a gold square on them that looks pretty close to the picture. Do I have a high-tech laundry card and a crappy credit card, or is that something else?
@krom: ...and not having you pay 40% in taxes. Interested in all that stuff? Is it worth 10% of your take home pay?
Chip and Pin technology has been trouble in the UK. Banks and credit card companies have denied fraud claims because they claim fraudsters can't crack the encryption on the chips or otherwise interfere with transactions, even though researchers have demonstrated how easily it can be done.
Does that mean the US shouldn't move that way as well? Of course not. But people should understand that the technology won't reduce fraud - at least not for very long.
My coworker was showing me a card the other day with both a smartchip and a stripe. Couldn't they just do that?
The banks in the US could make a whole bunch of money by upgrading merchant's readers and some sort of tech upgrade fee to customers? Really, they have not thought this through...
So what happens in tourist areas where people come to the US from places that don't have stripes anymore? You can't tell me that these merchants are refusing sales?
@radleyas: Many places don't require even a signature if the total is under $50. When I do need to sign, I can scrawl on a screen at least as fast as punching in a PIN, and can be totally unconcerned with anyone looking at or intercepting the PIN
Chip and PIN is a step forwards, but it's by no means fraud-prood.
A quick search for chip and PIN fraud will bring up plenty of other examples.
@LoadStar: Well you can fairly easily get the reader/writer for SIM cards. How is that the bad men can't get around these smartchips any less easily than the magnetic strips? I know strips are cheaper and whatnot, but it is still possible, no?
After reading the article, it seems like ATMs are the bigger issue, so the headline might be better written as "Why American Debit Cards Suck."