Paying by Credit Card

[menton1]

When paying by credit card in a restaurant in France, I just love those electronic machines they bring over to the table!! They actually use a technology that seems more ADVANCED than what we use in the US;

(A VERY rare occurrence!)

These machines are quite sophisticated, they use a wireless technology to communicate over the phone lines, and then a printer prints up a charge slip, all at the table!! It is particularly interesting to see the 2 different ways they use the machine as well-- for a credit card, they swipe the card; for a debit card, they insert the card into the machine and wait while it processes the information.

It is also my understanding that all the Visa and Master Cards that the French use are debit cards, as well as the Carte Bleue; these charges are taken right out of their bank accounts. So they can't run up any debt!!

I think anyone introducing these machines into the US might have

a windfall!

[=Mark]

European smart card technology has been way ahead of the US for over a decade. The US banking industry has been fighting against this technology for years. Why? Because a debit transaction can be less than one 10th the cost of a credit transaction. There's big $$$ in requiring the plastic toting public to sign those reciepts instead of punching in a PIN.

The big banking companies recently lost a huge class action suit in the US because those companies had adopted policies that prevented retail businesses from honoring debit transactions from other companies. This required them to process the transaction as a credit card, with the cardholders signature, which costs the retailer up to $1.50. In contrast if they could process it as a debit, requiring the customer to provide a PIN, the same transaction costs the retailer only about 15 cents. Now that the banking industry has been ruled against, you may see US automated retail transaction processeing being dragged kicking and screaming into the 21st century.

[VivreManger]

I am not sure what advantage the Euro system-- to the extent I understand it as previously described -- has for the consumer. Is the lesser cost simply due to the substitution of a digital code for a paper signature? In fact many US companies are going to paperless digitalized signature authorization for credit card transactions, so presumably that cost differential can be eliminated by a code-less system.

I suspect the differential might have another cause. Presumably debit cards are cheaper for the merchant than credit cards because they eliminate the risk of deadbeats. With a debit card, merchants are paid right away and know that they are paid right away. With a credit card the risk of non-payment is real. But unless that savings is passed on to the consumer in the form of lower prices, an unlikely outcome, the debit rather than credit card can cost the consumer. The immediate debiting of the consumer's account and the consequent loss of control over the timing of payment do cost the consumer, both in terms of opportunity cost -- that is the loss of income (admittedly negligible in the current low-interest climate) on the sum -- and convenience -- controlling the actual time of payment (within an admittedly limited time frame). If one pays one's credit card bills in full and on time, there is no interest charge to the consumer so the debit card carries no advantage. Furthermore the use of debit rather than credit cards undermines -- I would imagine -- the ability of a customer to challenge a bill after the fact, since with cash already in hand, the merchant is less likely to negotiate over a problem transaction.

More generally there is the problem for the US consumer abroad of the exchange rate charges added to every card transaction -- I believe this applies to both credit and debit cards, but I would be happy to learn otherwise. Within the last few years with little fanfare banks have been tacking on at least 1% or more to every foreign exchange transaction on a credit card. I noticed this on my last trip, comparing the exchange rates on my ATM transactions to the exchange rates on the credit card transactions in Switzerland and France. This is now a universal practice and means that cash is cheaper than plastic.

A few months ago Bux (I believe) and several others pursued a detailed discussion of this issue, but I can't find the thread, if you want to find it Jason Perlo may be able to help. It has been addressed in the NYTimes Travel section as well.

In addition to the greater expense of plastic in foreign currency charges, there is also the unreliability of the local systems. On at least two or three occasions on my last trip, my card was refused. When I returned home, my credit card company had in no way flagged my account, but in fact there had been some glitch in the local Swiss and French system that had caused the problem. This glitch can be highly localized so that one merchant gets a refusal, while the one next door that happens to be part of a different system okays it.

I have no idea if debit cards would reduce this problem, but I doubt it.

The upshot of all of this is to suggest that with plastic's greater cost and less convenience and reliability we may be witnessing the return of the paper economy at least in foreign travel.

As for the debit versus credit issue addressed by the two earlier posts, if the consumer pays off bills fully and promptly why should one want a debit card? A debit card seems useful only as a form of debt control for those tempted to live beyond their means. Perhaps if Bill Bennett was forced to pay his friends in Atlantic City and Las Vegas with a debit card instead of his personal form of credit -- royalties on his morality books, he would not have run up 8 million in losses?

[Bux]

More generally there is the problem for the US consumer abroad of the exchange rate charges added to every card transaction -- I believe this applies to both credit and debit cards, but I would be happy to learn otherwise.  Within the last few years with little fanfare banks have been tacking on at least 1% or more to every foreign exchange transaction on a credit card.  I noticed this on my last trip, comparing the exchange rates on my ATM transactions to the exchange rates on the credit card transactions in Switzerland and France.  This is now a universal practice and means that cash is cheaper than plastic. 

A few months ago Bux (I believe) and several others pursued a detailed discussion of this issue,

A favorite topic of mine and one that caused me to move most of my business from one bank to another. All currency exchanges involve some cost to the consumer. You will pay be being hit with a fee, a commission or just by getting an unfavorable rate of exchange. To the best of my knowledge MasterCard and Visa charge US cardholders 1% fee for making the transaction on credit card purchases. American Express charges 2%, still not so bad in comparison to the fees, commissions and bad exchanges one got over any counter. With all three cards, your exchange rate is the interbank rate and the best ou can get without changing millions of dollars. These same fees and rates applied to ATM withdrawals from your checking account. For a while these were one of the biggest bargains available to travelers. Then the banks got in on the action. Ideally they'd like a piece of every transaction you make, if not a piece of you. Clearly, if they charged you $102 every time you signed a slip for a $100 dinner, you'd complain, but they wisely figured out that people are sloppier about their money when on vacation and that since the exchange rate varied everyday and transactions were usually in odd amounts, you'd never notice if your bill for a 112.34 euros came back as $127.29 or $124.81 and they began asking the credit card company to take a few percent extra for the bank. Most banks take an additional 2% over the 1% taken by Visa or MC. Some take as much as three or four percent more.

Some travelers, such as VivreManger, began to think there was an advantage using cash for more expenses expecting a better rate on ATM withdrawals. I began paying for restaurants and hotels with my debit card or in cash after Chase told me they did not have a foreign currency surcharge on ATM withdrawals, but I was suspicious. I opened a second account at bank that had an international outlook and claimed not to add any surcharge for foreign currency transactions. Out of curiosity, I withdrew 100 francs from checking accounts at the two banks and when I got home, I found Chase had charged my account exactly 2% more than my new bank. The new bank became my main bank. Chase lost most of my business, not just because it tried to tax my travel expenses, but because it lied to me about its policies. I rather suspect that no one really understood the two percent thing applied to debit cards as well as credit cards, but a bank that doesn't know what it's doing is no better than one with it's hand in your pocket.

One thing I didn't cover is the fee you may have to pay to use an ATM abroad. My understanding is that both Visa and MC prohibit their banking partners from charging foreigners for use of an ATM, but your bank may be charged just as it charges other banks and your bank may charge you a fee for using any ATM not connected with one of its branches. The nature of your account and the balances you carry will affect that fee with most banks. I believe this is the gist of my previous post on this subject.

Several questions for VivreManger: Are you sure the differences in exchange rates you experienced between your ATM card and your credit card are due to different fees by the bank or can they be explained by fluctuations in the exchange rates? Have you considered shopping for a more travel friendly bank? Admittedly, no bank is perfect and Chase offered Mac friendly online banking while my new bank requires I use a PC or the internet. I believe there are several banks that do not charge the fee for a debit card or credit card. You may be able to get a credit card with one, even if it's not convenient to bank with one. Most credit unions do not charge a foreign currency conversion fee.

[Bux]

European smart card technology has been way ahead of the US for over a decade.

I'm not all that well informed on this subject, but it was my understanding that France set the standard for "smart" cards--those with a chip--and went ahead and incorporated that technology into their banking system and its machines. Unfortunately, other countries did not adopt France's standard and set another one as an international standard. Of course they did that with the Minitel as well. They will eventually catch up, and probably sooner than the US.

[menton1]

Wow, this got more complicated than I expected when I brought this up-- I was only commenting on the actual practice of bringing this multi-tasked wireless machine to the table, and, as an American, being wide-eyed at all its capabilities. It just seemed so futuristic compared to our system of taking the card over to a wired swiper and printer.

Is it true that all Visa/Master Card/Carte Bleue in France are debit cards? Can they use Amex as an actual credit card?

[VivreManger]

Several questions for VivreManger: Are you sure the differences in exchange rates you experienced between your ATM card and your credit card are due to different fees by the bank or can they be explained by fluctuations in the exchange rates? Have you considered shopping for a more travel friendly bank? Admittedly, no bank is perfect and Chase offered Mac friendly online banking while my new bank requires I use a PC or the internet. I believe there are several banks that do not charge the fee for a debit card or credit card. You may be able to get a credit card with one, even if it's not convenient to bank with one. Most credit unions do not charge a foreign currency conversion fee.

Bux, I hope I have correctly dated and attributed this quote to you. Normally I just cut and paste without the alt-Q. Let's see if this works properly.

As for the questions: My ATM card is directly with the bank where I have my checking and other accounts. My VISA card is with BankOne -- at least it was last time I checked -- through UAL -- I am thinking of changing it for all the obvious reasons, but that is a horse of a different color, worthy of a separate post.

For my account, my bank does not charge for any ATM withdrawals as such. I believe the difference in exchange rates was due to the fees BANKOne adds to credit card transactions, because I checked the amounts on ATM withdrawals and credit card charges that took place on the same day. Furthermore I compared these respective amounts over several days in two different currencies (Euro and Swiss Franc) and the difference was consistent. I did not do the math, but it was more than 1-2%.

I probably should have called BankOne to confirm my finding, but at that point I could not be bothered. However in anticipation of several foreign trips over the next few months, I probably should. Furthermore I do want to change credit cards so I am willing to learn more about alternatives, but as I said that is a differently colored horse. Inasmuch as travel along with dining are the subject of this forum, I presume it would be kosher to raise a question about members' credit card experiences, especially those that involve frequent flyer mileage.

[VivreManger]

Is it true that all Visa/Master Card/Carte Bleue in France are debit cards? Can they use Amex as an actual credit card? menton1 Posted on May 13 2003, 12:55 PM

Sorry I lost the attribution for Bux's questions earlier. Maybe it will work better for Menton1?

I don't know the answers to your questions, but I suspect that the first is yes and the second is yes. I do know that about 10 years ago when I was living in another country I set up a VISA card at the bank where I had a checking account and it functioned as a debit card. At one point I had reason to use my US VISA card that same year in that same country and it functioned as a credit card.

I also remember that in France whenever I saw a card being used for a transaction, the consumer needed to tap in their code. When they saw my card, they did not bother to request the number since they assumed a foreign VISA card is a credit card, not a code-bearing debit card.

[Bux]

I don't have any evidence at hand, but I believe the first card to add the surchage was a Citibank American Airlines card. Both Citibank and cards with a rewards program of any sort were among the first to add this surcharge. To the best of my knowledge there is no Milage card that doesn't have a surcharge. If there is one, I'd be interested in learning about it.

American Express has a Delta Skymiles card through its Optima program. I believe there is no surcharge beyond the 2% charge incurred by all AmEx cards used abroad. Although 1% more than what Visa and MC charge, it may be the least expensive milage reward card. Of course American Express has a yearly fee for this Optima card, or it's free if you already pay a fee for another AmEx card. Of course a Visa or MC is more useful in Europe than an AmEx card.

I know very little about actual banking laws and customs in France. We once considered opening a French banking account, but with the ease of use of credit cards and ATM cards, the advantages grew small for a non-resident. I can tell you that American friends of ours with an account in France make ATM withdrawals from their US bank account and deposit the funds in their French account. They've found it's much less expensive than wiring the money or any other kind of transfer. When we looked into opening an account in France, the first thing we realized was that we didn't undertand the terms even when translated to English.

[Dave the Cook]

I think this is the previous thread to which VivreManager alluded:

Plastic Problems

[pirate]

Bux: There's no problem opening a bank account in France. You have to write the amounts in French. Since I made sure not to do it I don't know what happens with bad checks. I used the account when travelling in France buying wine for my personal cellar because the winegrowers took checks but not credit cards. I collected all the cases and the "acquit vert" 's ( with wine you can't go anywhere without them), drove to CDG and had them airfreighted back to the USA. I then closed the account.

[VivreManger]

If you work and get paid in France, you have to have a bank account since most employers must -- I believe -- direct deposit your pay. Since I was working for only a month, I opted for the simplest and cheapest account which offered no checks or other services. I worked right next to the bank so it was easy to make withdrawals.

This was in pre-Euro days. Now with the Euro, a bank account in any part of the Euro market has much more utility than it did in the past. I believe that English banks have also established Euro-Sterling fungible checking accounts. I believe they are more costly than a simple Euro account would be on the Continent, but at least the terms would be in English. However that is no guarantee that they would be any more comprehensible.

I will start a thread on travel credit cards, but I got to get off now.

[Bux]

Overdrawing a French bank account is a serious offense. That's why French businesses are so willing to take personal checks.

At one time we though we might have some small French income, but that hasn't panned out and since the funds for the account would come from the US and we haven't felt the need to use checks, we didn't see a purpose to tie funds up in two countries. As for the ease of opening an account, the branch manager at our bank in NYC was happy to set everything up for us with an affiliate bank in France. The only complications came with choosing which options to check off on the form. In the end, all the options seemed silly as we had no real use for the account.

[Felice]

Just a warning to American travelers: don't be surprised if your credit card doesn't work right away. In the restaurant where I work, we will often have to swipe the card numerous times to get it to work and will sometimes resort to putting a piece of tape of the stripe, which always seems to get the card to go through.

The problem is that I imagine that many waiters will just say "desolé madame, your card is no good" when in fact it's fine.

I was recently at a store and the clerk was having trouble and then announced that American cards don't work. I then used my American card to see if this was indeed true and had no problem.

There are some places that actually only take a card with the chip, called a puce. These, however, are little mom and pop types stores. Also gas stations where you pump and pay yourself.

When I was in Italy I used my French card and was surprised that I didn't need to punch in my code, but signed just like you do in the States.

[grahamtigg]

A few points: -

The French have to pay for their bank cards (about $32 a year) which is one reason why cheques are more popular.

For an extra fee they can have a bank card that delays debiting one's account for around 30 days. This makes it comparible to a credit card that's always paid off in full.

In Euro land cheques will only work in the country of the bank that issues them. Between Euroland countries banks will charge a fat handling fee. This will change eventually.

Those who bank in the UK may be interested to know that Nationwide's cards don't have a foreign exchange loading - typicall 2.5% in the UK

As well as not needing a signature, the point about storing a pin number on a French card is to avoid the need to make an authorisation transaction. This certainly speeds things up in restaurants and supermarkets (until someone writes a cheque that is )

[Duncan]

I believe that English banks have also established Euro-Sterling fungible checking accounts. I believe they are more costly than a simple Euro account would be on the Continent, but at least the terms would be in English. However that is no guarantee that they would be any more comprehensible.

Another option would be an Irish bank account. They should be able to cope with speaking English.

There are some places that actually only take a card with the chip, called a puce. These, however, are little mom and pop types stores. Also gas stations where you pump and pay yourself.

Watch out for this at weekends especially. A lot of filling stations which are manned during the week may require a card with a French chip on a Sunday.

We've been impressed by the French restaurant credit card machines for some years. They have a mobile phone built in so they can authorise the transaction right at your table. Occasionally a foreign card can throw the staff: sometimes there is just one person in the restaurant who knows how to use the magnetic stripe reader, so we've had them take one look at the card then go rushing off to find the person who knows how to handle it. At least that's better than trying to put the card in the chip reader or refusing it outright, we've also had cases where they insisted that they had to try the card in the chip reader first and weren't allowed to use the magnetic stripe until the machine told them. I suppose that means fewer mistakes.

[Bux]

Watch out for this at weekends especially. A lot of filling stations which are manned during the week may require a card with a French chip on a Sunday.

As an aside to the credit card discussion, hypermarches in France offer the best prices on fuel. All of the service stations I've seen that are connected to a hypermarche are self service, but have a cashier on duty Monday through Saturday. On Sundays they operate on an unmanned basis. It's a good idea to ensure you are not running low on Friday or Saturday while touring in France if your card doesn't have a French chip. Hypermarches are generally found just outside towns and are usually well advertised with billboards on the roads entering towns.

[menton1]

Yes, we, too, were always unable to use our credit cards in the self-service gas stations. This discussion has been quite enlightening in that regard.

On the digression subject, if you can get a diesel car, the fuel is much cheaper than gasoline. Oddly enough, in the US, where diesel is about 30 cents/gallon HIGHER than gasoline (defies logic); In France, the "gasoil" price is about 10 Eurocents/liter LOWER than gasoline. I rented one last trip, and it ran quite well, was not noisy, and got great mileage.

Edited May 14, 2003 by menton1 (log)

[VivreManger]

On the digression subject, if you can get a diesel car, the fuel is much cheaper than gasoline. Oddly enough, in the US, where diesel is about 30 cents/gallon HIGHER than gasoline (defies logic); In France, the "gasoil" price is about 10 Eurocents/liter LOWER than gasoline. I rented one last trip, and it ran quite well, was not noisy, and got great mileage.  menton1 Posted on May 14 2003, 08:07 AM

This is all well and good, but a diesel engine can be hell on the Italian autostradi and the grandes autoroutes that have a lot of German and Italian drivers.

I once rented a diesel Alfa for a trip from Graz to Florence, with side trips to the Italian lakes. Driving on the Venice-Milan road -- the busiest in Europe, makes the New Jersey Turnpike seem like a Sunday stoll through the park -- was hell. There was construction so lanes were constantly dropping off. The remaining two lanes -- at best -- offered a choice between Polish extended lorries chugging along at 25 mph or BMWs at 125, that is M ph, not K ph. The diesel did not have quick enough acceleration to move smoothly between the lanes.

[VivreManger]

To return to the main thread on credit cards. The following article from the BBC websites alerts us to the increasing ubiquity of pin-requiring chip-embedded credit cards. The process is taking off in the UK, as described in the link.

One wonders how long it will take US credit card companies to introduce the new cards and at what expense to the consumer?

In the meanwhile we may have to anticipate US cards being increasingly useless abroad even as the banks figure out ways to charge us more for the occasional privilege.

http://news.bbc.co.uk/1/hi/uk/3039619.stm

[menton1]

On the digression subject, if you can get a diesel car, the fuel is much cheaper than gasoline. Oddly enough, in the US, where diesel is about 30 cents/gallon HIGHER than gasoline (defies logic); In France, the "gasoil" price is about 10 Eurocents/liter LOWER than gasoline. I rented one last trip, and it ran quite well, was not noisy, and got great mileage. menton1 Posted on May 14 2003, 08:07 AM

This is all well and good, but a diesel engine can be hell on the Italian autostradi and the grandes autoroutes that have a lot of German and Italian drivers. 

I once rented a diesel Alfa for a trip from Graz to Florence, with side trips to the Italian lakes.  Driving on the Venice-Milan road -- the busiest in Europe, makes the New Jersey Turnpike seem like a Sunday stoll through the park -- was hell.  There was construction so lanes were constantly dropping off.  The remaining two lanes -- at best -- offered a choice between Polish extended lorries chugging along at 25 mph or BMWs at 125, that is M ph, not K ph.  The diesel did not have quick enough acceleration to move smoothly between the lanes.

Actually, most cars in the lowest rental category are underpowered-- both gasoline AND diesel; You have to build up speed gradually in all of those. For more power, you have to move up in category--

I also get chills when standing outside the car looking at the tires-- they look like toy tires!! When you get in and do 140 km/h with those tires, it gives you pause....

[Bux]

I recall some discussions on rec.travel.europe some time ago about the UK and French cards. At the time they were designed to different specifications. Here's what I said earlier.

I'm not all that well informed on this subject, but it was my understanding that France set the standard for "smart" cards--those with a chip--and went ahead and incorporated that technology into their banking system and its machines. Unfortunately, other countries did not adopt France's standard and set another one as an international standard. Of course they did that with the Minitel as well.  They will eventually catch up, and probably sooner than the US.

I suppose I don't drive the way I did when I was younger, but I've not had a great problem passing on country roads driving diesel cars. As the roads get better in Europe--I've been driving there since 1964, actually earlier if you count a Vespa--a full sized car becomes a more interesting proposition for the highway, although they are a real drawback in medieval towns, city centers and many tourist sites when you're negotiating narrow lanes and looking for a parking spot. Generally I've been happy enough with a compact diesel if I can get one. A Renault Megane of the equivalent Peugeot are fine with me. I'm actually less pleased when I'm offered a larger car at the same price. Smaller than that is a problem in terms of speed and pickup for me. Your millage (and acceleration) may vary.

[WHT]

I think one of the reasons that the Europeans are ahead of the USA in use of technology is based on two factors. The first being that the infrastructure is so heavily subsidized and then you have less resistance to change.

Look at cell phones for one. A lot bigger over their and more of them. In the eighties the relative cost was almost half of that in the US. Nokia had Motorola beat almost from the word go.

[Margaret Pilgrim]

Adding still another tangent to this thread, for those of you who are used to charging goods and services in France but haven't been in recent weeks, be prepared for "sticker shock" when you reconcile your next credit card bill. During the past year I have grudgingly accepted the 2 to 3% surcharge added by VISA for conversion on foreign purchases as a small cost for ease of doing business. However, when added to the recent plunge in the dollar, I was appalled at the difference in conversion of euros to dollars during an April visit compared with our March visit. When a 625 euro charge comes through at $707, you are aware of a sizable chunk of change!

(My husband, who just brought in the paper, just called to me that yesterday the euro is up to 1.1738. That hurts.)