Why Your Credit Card Won't Work In Europe

The computer chip on a smart card generates a special code whenever the card is used, and that code is unique to every transaction.
Nicholas Rigg / Getty Images


- Foreign banks have moved to smart credit cards, equipped with computer chips.

- Those cards offer better fraud protection, and are rapidly becoming standard.

- Your U.S.-issued card may not work in some automated kiosks.

On a recent trip to Amsterdam, I thought to take the train from Schiphol airport to the city. The ticket kiosks take credit cards or coins only, but it should have been no problem – the Visa and MasterCard logos were on it. The card went in and the machine asked for a PIN.

Not understanding what was happening, I tried a Visa and an American Express as well. No dice. At the ticket counter, a hand-lettered sign (in English) said that some cards from the United States might not work, and that it was best to use cash. Luckily I had no problem with the ATM.

The above scenario is becoming more common for Americans traveling outside the country. The reason is the smart card, which is rapidly becoming the standard credit and debit card in Europe, Asia, Canada and Mexico.

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A smart credit card contains a tiny computer chip. Once put inside a payment terminal, the chip prompts the card's owner to punch in a security pin, authorizing a purchase. While most credit cards issued by European banks have both the chip and the magnetic strip, Americans are still using cards with magnetic strips only.

Why is this so? Randy Vanderhoof, executive director of the Smart Card Alliance, which works to influence standards and provide a forum for the industry, said one reason is the cost – to the merchants, rather than the card issuers. (While MasterCard and Visa process the payments, the bank is the one that actually issues the card).

The point of sale terminals at gas stations and retail outlets are bought by the store, and buying new terminals is not something merchants will want to do without a good reason. "The card issuers, third party payment processors and merchants all have to be aligned around the chip technology," he said.

(There are cards issued in the United States that have chips on them, but those are for contactless payment systems, such as ExpressPay, payWave and PayPass from American Express, Visa and MasterCard, respectively. They use a different technology than those mentioned above and can't be read by the European card readers).

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