Chip and Pin-Requiring Credit Cards

[VivreManger]

In the French forum there has been some discussion of French credit card systems, wireless, pin-requiring chip-bearing etc.. Australia and NZ have adopted the latter requirements as well. Now it seems the UK is moving in the same direction, as the following BBC-link suggests.

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

What problems might this pose for credit card holders in the US since their banks have been much slower in adopting the new technology?

As some of you may realize, some US banks -- particularly the ones offering airline mileage -- tack on a 1 to 2% charge on all foreign currency purchases over and above the 1% exchange transaction charge levied by Visa/MC. In that regard what are UK bank credit card practices for foreign purchases?

[Bux]

I am going to guess that US cards will continue to work in the UK just as they've worked in France. In fact, unless France has made changes in their chip, US cards may work in the UK as well as FRench ones. The last I heard was that the French and UK chip technology was incompatible. Can someone in the UK confirm that?

[lamington]

There certainly used to be some problems using some British cards in some French ATMs/cashpoints, despite claimed accessibility. This may have had to do with the chips. Don't know. In the last two years I've only had one problem though.

[JudyB]

I think you are right that the French chips are incompatible with the UK ones (and the standard that the rest of Europe is going to use). I believe that the French are supposed to change theirs to be compatible by something like 2005, but I'm not certain of the date.

The first time we got caught out trying to buy petrol in France on a Sunday (in 2001) we tried our UK debit cards (which have chips) as well as all of our credit cards and the French machines wouldn't take them.

[CheGuevara]

a card which does not have a chip - or one which is incompatible - simply needs to be swiped.

smart chips are simply capable of storing more infomration than magnetic strips, as well as being more secure to fraud. bank charges and usability are not affected at all by this change. most places around the world use - and will continue to use for decades to come - magnetic readers.

[macrosan]

I think you are right that the French chips are incompatible with the UK ones ...

And quite right too, long may it remain so !!! What's more, the French call them frites

[bateman]

Think they have done something in the last few months in Paris, pre Christmas my card wouln't work in any of the Metro machines and some of the market traders couldn't swipe it. However a few weeks ago (during the Fat Duck I sob missed) everything worked perfectly, machines, swipers.

The only thing they can't do over there is be phoned by Barclaycard to authorise transactions, one of my cards was put under fraud alert for "unusual spending patterns" but they couldn't contact me so it started being refused, tres embarassing at La Truffière!

[Duncan]

What problems might this pose for credit card holders in the US since their banks have been much slower in adopting the new technology?

It shouldn't present any problems as the system will continue to use the magnetic stripe when there is no chip, or when using the chip is inappropriate. Of course, as with the French system, this will depend on proper staff training to work.

I read an article recently that said that they would be able to mark cards with chips to automatically tell the assistant to use the magnetic stripe instead. This is necessary because (amongst other reasons) some people are unable to use a numeric pad to enter a PIN, and in those situations the assistant will ask for a signature. At no time is the assistant told WHY they need a signature. Given this, the assistants should at least all know how to handle a card requiring a signature.

As some of you may realize, some US banks -- particularly the ones offering airline mileage -- tack on a 1 to 2% charge on all foreign currency purchases over and above the 1% exchange transaction charge levied by Visa/MC. In that regard what are UK bank credit card practices for foreign purchases?

Most UK card issuers load the exchange rate by up to 2.75% on top of the wholesale rate charged by Visa/MC. There are apparently two issuers who don't put any loading onto the wholesale exchange rate

(Nationwide & Lombard Direct).

[peterpumkino]

I think you are right that the French chips are incompatible with the UK ones ...

And quite right too, long may it remain so !!! What's more, the French call them frites

And the Americans call them 'Freedom Fries'!!

I have had a US Credit Card for yonks and have had about 2 problems in France and I rather think that they were due to shop assistants not knowing how to deal with chip-free cards - and, unfortunately, I have use my card A LOT in France.

[VivreManger]

Quite apart from "the chips with everything" problem that is on the horizon, there seems to be another possible glitch in using US credit cards or perhaps credit cards in general. I am reasonably confident it is not a chip problem, but has something to so with the nature of the credit card approval systems in Europe -- are they crankier than the States? In last November in Switzerland and France, I used my visa card freely with two or three exceptions -- not weekend filling stations. In one artisanal food store in Lausanne -- worth a separate posting if I can ever find my notes -- the Visa card did not work after several tries. I then produced a US Mastercard which went through immediately. Both, I believe are magnetic stripe not chip-cards. A similar problem occurred at Au Petit Marguery in Paris. The same Visa card was refused. In this case American Express worked. That is not a restaurant unaccustomed to Americans. I also confirmed that at no point had my bank put any kind of hold on the card.

Is there anybody out there familiar with the detailed workings of credit card purchase approval systems in the US and Europe, who can address this question? Is there anyway to prevent the problem, other than by overcoming it with back-up cards.

[JudyB]

I don't know about the innards of credit cards, but I think that problem that you refer to is a general one with magnetic stripe credit cards.

We visit France (from the UK) fairly frequently and for a few (2?) years we had problems where they couldn't reliably read my husband's credit card but mine was OK. In some shops the card failed first time, but worked if they persisted. Since the card in question was replaced I don't think we've had any serious problems (once they have been reminded to use the right slot for non-chip cards).

My guess is that these problems are due to some degree of misalignment of the magnetic stripe from the norm in both the card and reader. With the French cards using chips they won't be using the magnetic card reader so often so they may not realize if the machine needs to be adjusted.

[estufarian]

I'll nominate myself as a credit card expert, having designed and implemented several credit card systems.

The 'probable' issue is the communications link. I've been declined for several reasons, and always check on my return to ascertain why. Indeed the pattern of usage, possibly identifying fraud, can be an issue (rarely), as can being overlimit (more likely), but the vast majority (over 80% by my imperfect sample) are because the communication link wasn't completed (i.e. the cardholder bank never received the authorization request). NOTE: At my bank we recorded EVERY authorization attempt (after I redesigned the system), so if any request was received we were able to check back later.

That's probably not too surprising - how many attempted international calls go awry anyway? And a busy signal for credit cards constitutes 'awry' as the standard for end-to-end response is 3 seconds (so, merchant to local bank, local bank to international exchange point, international exchange point to Visa (say - could be any card)International (usually USA), Visa international to cardholder country exchange point, country exchange point to cardholder bank..... and then all the way back too). And then the massage needs to be displayed on the local terminal - imagine how many different terminal types there are in the world!

So, my usual response when 'declined' is to ask for a retry. But if any link is down, nothing will work.

I'm astonished at how few times the system fails - but that doesn't help you when you're stuck, helplessly, at a foreign point of purchase.

Now, if it's your credit card company that declines you - then go ahead and dump on them. They need to review their policies (I'm available for consulting at reasonable rates..... ). And there could be some attempt to (better) standardize international response codes (e.g. to signal a 'failed' rather than a 'declined' request). But that still only helps if the merchant has a 'modern' terminal.

[lamington]

One more comment perhaps... There are payment terminals in many countries which will only accept local cards, even if the terminals are marked VISA (not sure about M'card) -- these are in my experience terminals integrated into vending machines usually: petrol stations in Switzerland have never accepted my foreign VISA cards, NYC subway ticket machines only accepted local cards (at least initially), and ticket machines in Melbourne only appear to accept Australian cards.

Part of this might relate to whether the VISA card is a 'debit' card (issued by some banks, and the money is drawn straight from your transaction account if you are using it locally), or a true 'credit' card, where the transaction is recorded in a specific credit account regardless of what country the transaction occurs in. I have only ever tried using debit cards.

--lamington