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American globetrotters, take note: On your next trip overseas, you could find yourself in a credit card quandary. A growing number of countries in Europe, Asia and South America are adopting a new chip-and-PIN credit card system that isn’t fully compatible with the standard magnetic stripe cards we use here in the States. Here’s the scoop from The Best Way to Carry Money Overseas:
“Designed to reduce fraud, [chip-and-PIN] cards rely on an embedded chip that transmits information to a merchant, which the consumer then verifies by entering a PIN. While U.S. cards with magnetic stripes will still work as long as there’s someone to swipe them, many travelers report problems using their cards in ticket vending kiosks, at gas stations or in other places featuring automated payment machines. If you find yourself in this dilemma, your only alternatives are to find an attendant to scan your card or to use cash instead. … However, [to solve this problem] Travelex has introduced a prepaid chip-and-PIN MasterCard that works like a hybrid between a credit card and a traveler’s check.”
While a few U.S. banks have begun offering chip-and-PIN cards to a limited number of customers, this prepaid offering from Travelex is the one that’s widely available to all travelers. The Chip & PIN Cash Passport can be purchased online at Travelex.com and must be preloaded with at least $250 worth of funds in either euros or British pounds. There are no fees for loading the card, making purchases or withdrawing money at ATM’s, and if the card is lost, Travelex will immediately offer a replacement — or emergency cash up to the remaining balance on the card.
Of course, there is a caveat: the lousy exchange rate. This morning, I tried loading the card with $1,000 (USD), which translated to a balance of 664.90 euros — an exchange rate of $1 USD = 0.6649 EUR. Compare that to the inter-bank rate listed on Oanda.com, a popular currency site: $1 USD = 0.7153 EUR. (The inter-bank rate is what large financial institutions use when exchanging currency with each other, and it’s the rate you’d get if you made a purchase with a regular credit card overseas, minus any conversion fees.) If the Travelex card offered that exchange rate, my $1,000 USD would have given me over 715 euros of spending money.
The Cash & PIN Passport card could still provide a decent value for your purchases, depending on how steep the foreign transaction fees are on your usual credit card. But even if you’ve got cheaper alternatives, it may be worth carrying the Travelex card as a backup when traveling in a country where chip-and-PIN systems are the norm.
See more tips on how to Get the Best Exchange Rate.
— written by Sarah Schlichter