Business Traveller

from Reuters Money:

Why U.S. credit cards fail overseas

For comedian Dan Nainan, who has traveled to 10 countries already this year, trying to use his U.S. credit cards to buy train tickets in Hong Kong or rent a bike in Toronto was no laughing matter. Each time he swiped his card, the transaction could not be processed.

"The machine has no idea that any country would be so stupid as not to have the same kind of credit card the rest of the world does," he says. "It's really, really frustrating."

Having a credit card when you were traveling outside the U.S. used to mean you'd be able to get something you needed, no matter where you were. Sure, you might face steep transaction fees, or find a mysterious exchange rate. Now it's a crapshoot whether your card will get accepted.

That's because the rest of the world has moved away from the magnetic strip which provides the guts of most U.S. cards to a technology dubbed chip-and-PIN. Those magnetic strips rely on the information carried through a network to authorize the sale. Not so with the chip-and-PIN smart cards, which uses a microchip embedded in the card containing all the relevant information for a purchase and are generally used with a PIN, which has reduced fraud significantly.