Many credit card users still having trouble overseas
The little black magnetic strip on the back of nearly every credit card ever issued in the U.S. may be a problem for consumers who want to use their accounts when they travel abroad.
Americans who travel to foreign countries, particularly those in Europe, Asia and Central America may find that they have difficulty when trying to take on credit card debt to make purchases, according to a report from the Los Angeles Times. This is because the magnetic strip on the cards are part of a security system that has been largely abandoned overseas.
Instead, most foreign countries now use a system known as “chip and pin” to store credit card purchasing information, the report said. Instead of storing it on the magnetic strip, the technology for which has been around for decades, foreign credit cards come with a microchip embedded in them, and require consumers to enter a code when making a purchase. And because these are so ubiquitous overseas, many businesses and, more often, automated kiosks, don’t give shoppers the option to swipe their cards as they would here in the U.S.
But because many Americans travel overseas regularly, a greater number of lenders are now beginning to offer alternative cards that store user data on both the magnetic strip common here and microchips, so that they can be used anywhere, the report said. Often, though, these are being issued on a selective basis to either more affluent consumers or those who travel abroad with regularity.
Part of the delay in switching over is that U.S. card issuers have had little incentive to undertake the process, the report said. Until recently there was no real consumer demand for the new cards, and swapping every card and card reading device in the U.S. would be quite expensive.
“We have an older card infrastructure,” Janna Herron, a credit card expert for the personal finance site Bankrate.com, told the newspaper. “And there’s a lot of cost associated [with changing], from the retailer’s and the card issuer’s point of view.”
It is possible that U.S. card issuers could use technology emerging on smartphones to leapfrog the need for chip and pin system and go right into widespread mobile credit card payments.