Chip and PIN-Based Credit Cards

Q: Peter, I travel a lot to England. I find that more and more merchants do not accept my credit cards because they use "chip and PIN" systems over there. I have asked my credit card companies here about chip and PIN, and they act like I have three heads. What's the solution, besides exchanging some dollars for pounds in advance?

–Carolyn, Springdale, Ark.

A: Since 2004 many banks around the world (and particularly in the U.K.) have begun switching to chip and PIN-based credit and debit cards, because they say it cuts down on fraud. Chip and PIN cards have embedded microchips and require PIN numbers to complete a transaction. There is no receipt to be signed. Merchants have special chip-reading devices that scan the cards and then ask you to enter your PIN.

Unfortunately, American cards, which have a magnetic stripe on the back and require a signature, are somewhat incompatible with this system. This can create a big hassle—and confusion—when you're traveling. But you do have options.

Some chip and PIN devices literally cannot read your American card. If you encounter one of these when you're trying to make a purchase, ask the merchant if he or she also has a regular swipe-card reader that can handle cards without chips. More often than not, the business will have such a reader. If it doesn't, you're out of luck.

Some stores have machines that read both types of cards. However, the cashier may be unaware of this (or poorly trained). Usually, getting the machine to read your card is just a matter of the cashier following a different set of prompts on the screen to complete the transaction. If the person balks, gently insist that he or she try anyway, or ask that the cashier process the transaction in a way that allows you to sign for it. After all, your card is still legal tender. It's just up to merchants to decide how motivated they are to figure out a way for you to use your card in order to make the sale.

There may be some circumstances where it is just not possible to use an American card. If you arrive at a train station after the clerk has gone home and the self-service ticket machine only uses chip and PIN technology, you're out of luck. In order to avoid getting stuck when you encounter a situation like this, your best bet when traveling abroad is to have a variety of different payment options available to you. Bring some cash, a credit card, a debit card, and even a few traveler's checks to cover all the bases.