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If you're planning to travel abroad, you may already know to use a credit card without , but you might also have heard you need a card with "chip-and-PIN" capabilities. That's no longer necessarily true, although it used to be.
To understand why, and what changed, it helps to know some background about chip-enabled credit cards:
So what if you're traveling internationally with a card that doesn't have chip-and-PIN capability? The short answer: It was once a bigger problem, but now you're much less likely to encounter it because many payment terminals abroad have been updated to accept both kinds of cards.
The little metal square you see on your credit card is an (named for Europay, Mastercard and Visa, the companies that developed the technology).
EMV chips were designed to make credit card transactions more secure by preventing thieves from stealing your information — aka "" — when you swipe the magnetic stripe on the back of your card.
EMV chips can:
EMV-enabled chip cards were launched in 1994, although they didn't come to the United States until much later. But even initially, there were two types:
(Magnetic-stripe cards with no EMV chips at all were still being produced at the time, as well.)
"Chip-and-signature [verification] by itself provides little to no account takeover protection," says Robert Siciliano, CEO of Safr.me, which educates consumers about fraud prevention and personal security. "Chip-and-PIN is more secure since no one can use it without that PIN code, the same way that a debit card can't be used for a transaction without the PIN."
Unlike European banks, which made chip-and-PIN their new standard, the U.S. opted for "chip and choice," meaning the issuing banks could choose for themselves whether they wanted to add a PIN requirement for an additional layer of security or use the cardholder's signature, says Randy Vanderhoof, director of the U.S. Payments Forum, which represents the payment industry.
The majority of U.S. banks ultimately settled on using chip-and-signature, since verifying a cardholder signature at the point of sale was already being done. This also meant that a business that accepted credit cards didn't have to make any costly upgrades to accept chip payments, since the new cards also kept the magnetic stripe intact.
U.S. issuers rejected the use of EMV for years, mainly because card fraud in the United States had been lower than in the rest of the world.
But in October 2015, a policy change was mandated by the U.S. divisions of the Visa and Mastercard payment networks, creating a powerful financial incentive for chip cards to become the dominant technology. The networks agreed that the liability for would now be the responsibility of any merchant that didn't upgrade its payment terminals to chip cards. This "liability shift" also applied to card issuers that were still making magnetic-stripe-only cards and not including chips in them.
The shift meant that a mom-and-pop store that didn't invest in a chip reader would be on the hook for any purchases made in their store using a counterfeit card. Previously, the payment networks themselves were generally responsible.
"Brands have the power to define certain rules. By mandating that go to the least compliant party in EMV acceptance, [Visa and Mastercard] were able to ... get the market on one platform," says Brian Riley, director of the credit advisory service for Mercator Advisory Group.
It was good advice when the two different types of chip cards first came on the market. Payment terminals in parts of the world that adopted chip-and-PIN initially didn't recognize chip-and-signature cards and would ask cardholders to enter their PIN to complete their transaction. If you were at an unmanned terminal — say, at a train or bus station — you were out of luck if you tried to use a chip-and-signature card.
But once the U.S. began to widely adopt EMV technology, the global brands that control the specifications in payment terminals worldwide made changes, enabling cards without PIN technology to be recognized and therefore for transactions to be completed.
"A large majority of those unattended kiosks have been updated," Vanderhoof says. "Out of the United States, the terminals should be able to tell that a PIN wasn't issued on your card."
It's more important, he says, to notify your issuing bank that you're traveling and plan to use the card abroad to avoid triggering a suspicious activity alert that could temporarily prevent you from using your card.
And, of course, it may not hurt to carry a little cash on you when you travel internationally, just in case you do find yourself in a situation where a card won't work.