Next year, Travelex will soon begin selling prepaid cards with an embedded microchip to store all their payment data, according to a report from the Associated Press. With this new payment option, consumers can load money onto the account, which will be converted to any desired foreign currency at an exchange rate between 3.75 percent and 11.75 percent. By doing so, consumers can also avoid taking on credit card debt when traveling.
When a consumer tries to take on credit card debt in Europe with their current cards, they will typically receive an undesirable exchange rate on their American currency, as well as a foreign transaction fee of about 3 percent, the report said. However, most businesses overseas cannot handle American credit card debt because of a discrepancy in technology.
American cards still use magnetic strip system to validate transactions that result in credit card debt, while European lenders upgraded to the more sophisticated "chip-and-pin" system years ago.