Credit Denied: Why Your VISA, MC Won’t Work Abroad

Posted August 14, 2010 in Banking Law by Arthur Buono

A new credit card technology being rolled out everywhere but here has left some American travelers stuck this summer. The new cards protect better against fraud than the old ones. So how come the U.S. isn’t using them?

  • New, more secure credit card technology used outside U.S.
  • Travelers unable to use their U.S. credit cards at many locations abroad
  • VISA, Mastercard, and card-issuing banks reluctant to foot bill for new system


"Chip-and-PIN" Card System Much Safer

The new cards use what’s called "chip-and-PIN" technology. They have a computer chip embedded in them. All that’s needed to complete a purchase is the cardholder’s PIN. This compares to the "swipe-and-sign" cards used in the U.S. The cards use different point of sale devices to complete the purchase, and that’s where the problem lies for Americans.

U.S. banks are dragging their feet because they don’t want to pay the price to install the new system. For now, banks see this as an issue just for frequent travelers. But you’d think that the cost of the new cards would be more than made up in fraud prevention here at home. Right now anybody can use your lost or stolen credit card. This becomes much tougher if the thief needs your PIN to use the card.

To protect cardholders, and to encourage credit card use, banks limit your loss in the case of unauthorized use. This protects you in the event someone steals your card or gets hold of your account information. Your loss is capped at $50. If you inform your bank of the theft or loss before any unauthorized use occurs you will not be responsible for any unauthorized charges. The same $50 cap also applies to debit or ATM cards, but only if you notify your bank. Otherwise you can lose the total amount in your account. It pays to read your card statements as soon as you get them.

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