Challenges You Face Using Your Credit Card In Europe

It used to be that every time you went to Europe, you were faced with a confusing array of currencies.   It seemed like every time you travel a few miles in any direction, you crossed a border and had to change all of your money.   Well, that era has ended and we now have the convenience of the Euro.   On the other hand, most people will use credit cards for almost all of their transactions anyways.

You would think that would be a good think, as they should have the same Visa, MasterCard, and American Express acceptance that we have here in the States, but don’t expect everything to go seamlessly in the Old World.

Some Potential Gotchas

One of the big ones is the Chip and Pin system.   This is a great system that, as it’s name implies, uses a chip in your credit card in combination with a PIN number entry.    From what I understand, it works very well, except for the fact that virtually no US issued credit cards have that feature.     When an American cardholder tries to use this system, they will get an error and be forced to see a person to try to figure it out, creating inconvenience from convenience.   Worse, many of these systems are deployed in unattended areas such as train stations.

Another problem you might encounter is MasterCard acceptance.   Many times, applicants can choose Visa or Mastercard when they apply for a card.   For the most part, it makes no difference as I have yet to encounter an American merchant that accepted one without the other.   This is not the case in Europe, as many merchants will only accept Visa.   One high profile example will be the 2012 Olympics in London.    They have announced that they will only accept Visa for ticket purchases.   If you are planning on traveling to Europe, and you have a choice, pick Visa or at least carry one as a backup.

Another major issue that travelers to all parts of the world face is the foreign transaction fee that credit cards charge.     This is a scam, pure and simple.   Credit cards offer what is actually a good exchange rate, but then they tack on a 2-3% fee for no other reason than the fact that they can.    For example, Amex recently increased their fee from 2% to 2.7%.      When I am traveling outside the country, I will put away my Amex reward card and use my Capitol One card that has no foreign transaction fee.   There are a select few banks that offer cards that don’t have this fee, such as the PenFed, the Pentagon Federal Credit union.

Another, more insidious scam is the Dynamic Currency Conversion system.    A merchant offers you the option of charging something in your home currency.    It is more complicated, but in this case the merchant is getting a huge kickback by getting your to agree to pay in dollars, with a huge conversion fee included.    Naturally the huge conversion fee is not typically mentioned.   The worst part is that your credit card company will also charge you the foreign transaction fee, regardless of what the merchant tells you.   You just won’t find out until a month down the road.

One Cool Thing

It is not all doom and gloom over there for credit card holders.   One neat device you will see in Europe is a portable, wireless credit card processor.   This device looks like a cross between a standard credit card machine and an accountant’s printable calculator.    Many restaurants will present this device to customers at the end of the meal.   You swipe your card, enter a tip, and print your receipt without having to wait for the waiter to do anything.    This is a huge advantage when confronted with European style service which places an emphasis on not interrupting the diners.

Some Suggestions

When traveling in Europe or anywhere outside of the United States:

• Use a credit card like Capitol One or PenFed that has no foreign transaction fees.

• Decline all offers from merchants to convert your charge to your home currency.

• Save your receipts, especially on big ticket purchases like hotels and rental cars. Request a chargeback on any purchase where a merchant uses this scam without your consent.

Europe is a lot of fun, especially now that the price of the Euro has been falling.   Although you can now enjoy the convenience of a single currency throughout much of the continent, you still need to be aware of both the scams and the technical challenges that currently face Americans in Europe.