Are EU based credit cards useful in or outside EU?

Question

I generally find US credit cards useful everywhere. Mostly because if there's fraudulent activity or scammy merchant, I can get my money back. I don't need the credit but it is good to not tie up cash. Other benefits: quick intl replacement if lost/stolen, no foreign transaction fees, low fx fees, cashbacks.

I'm not familiar with how things work in EU. Is it useful to have a EU based credit card? Should one bother to get a credit card from a bank in an average EU country? Especially if he needs to tie up cash e.g secured credit card, like $10K of cash tied for $2500 of limit (not sure how long this is needed)

Answer 1

Usually, or even always, European credit card companies will protect their customers and reimburse scams. Often they also include insurance on items paid for by the card and holidays paid for by credit cards were beter protected during Covid than those paid in other ways. Some cards also seem to include travel insurance but I never have seen that offered to me, might be country specific or bank specific.

I do not think that having an European credit card is better than using your American one, as long as you do not need to pay huge costs on your card. Having a card on the Visa or Mastercard system is more useful in Europe than American Express, and other companies are even less well known and accepted.

I would suggest to search for a card at home with the best foreign deals, not for an European credit card, which may be hard to get as many are bound to bank accounts that receive regular payments like wages.

Answer 2

Credit cards issued in the EU can be used worldwide, costs and fees depends a lot on the country but cards with no foreign transaction fees and no currency exchange fees do exist in some countries (e.g. Fortuneo in France). Premium credit cards with additional insurance are also very much available, in some cases without any monthly fees.

Many European countries have popular debit card network that can be used locally for cashless payment but a credit card is certainly very useful, especially if you travel abroad (which is this site's main theme).

At the same time, there are many differences with the US. Very high credit limit are unusual, as is not paying your full credit card bill every month. It's not common to get multiple credit cards just for credit, cash backs are lower or non-existent.

The fraud landscape is also completely different. Disputes and protections exist, especially if your PIN wasn't used. However, chip-and-PIN is the default and fraud is much lower in the EU to begin with. In fact, fraud has become so hard that criminals actually prefer to use the cards they steal in the US! Consequently, it's often necessary to explicitly notify your bank if you want to be able to use your card in the US or without using the chip (I have had banks in two different countries with a feature like that in their app, neobanks and fintechs do it too).

Of course, whether it's worth getting another credit card if you still have access to your US credit card is a completely different question. It's going to depend a lot of where your income comes from: If you get an income in euros and have bills and expenses in a European country, you will almost certainly want a bank account and local bank card. Making sure that card is a credit card or getting an additional credit card would spare you the fees and troubles of transferring your money back to some US account.

On the other hand, if your income still comes from the US or you can pay your US credit card bills from your EU account without too much trouble then I guess getting an EU-based credit card won't make a ton of difference and probably isn't worth the trouble.

Answer 3

A few additional points:

• Most electronic payments in the EU are regulated under the Payment Services Directive (PSD) and its successor (PSD II). This defines a number of strict rules, including the fact that the card issuer must ascertain you authorised the payment (and PSD II raised the bar significantly) but also that payments, once authorised by you, are irrevocable.

• For both historical reasons and the requirements of PSD II, chip and pin is nearly universal for transactions at a point of sale, the exception being contactless, but that has strong limits on the amount if no authentication method is used. Online transaction nearly always require strong authentication, often using the bank’s app coupled with a pin and/or biometrics. Card payments fraud is extremely low in Europe for these reasons.

• The counterpart is that if you did authorise the transaction, there are very few situations where you can get the bank to reverse the transaction. It is not their job to handle contractual matters (I.e. a dispute with the merchant about the service/product provided).

• So-called “three party systems” (which basically means Amex) have slightly different rules, I don’t remember all the details, though IIRC it has to do mostly with the commissions they’re allowed to charge.

• There are different types of cards available, including “electronic use only”, debit, deferred debit, and credit. Proportions probably vary a lot from one country to another. In France for instance a lot of cards are deferred debit (all payments from a given month are taken from your account at the beginning of the next month).

• Some higher end cards will include advanced protections/insurance. But annual fees can escalate!

• Many cards will have transaction limits (per day, week and/or month, for ATM withdrawals, POS and online purchases separately or together, for EU or international payments, etc. Even if you have a million euros on your account, you won’t be able to spend it. There are often soft limits (you can ask them to be increased temporarily) and hard limits (you can't spend more than that whatever happens, unless you upgrade to a more expensive card). This is especially true for deferred debit cards (the bank is really extending free credit for up to a month).

• In many countries, there are strong protections to avoid people getting into incontrollable debt (though that still happens). While there are no credit scores, checking your finances (income and regular outgoings) is frequent. In France for instance, one cannot commit to reimbursements exceeding 30% of revenue. Other than Amex, actual credit cards are quite limited, mostly store cards.

• Shop around. There are many banks, neo-banks and fintechs which can provide accounts, cards, and more. Fees and services vary wildly.

• All payments in euros inside the EU must always be the same cost as a domestic payment (for the same service from the same provider).

• If you travel a lot and/or charge a lot of money to your card, then getting an Amex card (and paying it off on time every month — note that even with Amex, many cards won’t allow otherwise anyway) is a good idea for the miles and possibly travel insurance (though you now often need the very expensive ones to get serious coverage). You won’t be able to use them everywhere, but any mile you can earn is good to take! Cards based Visa or MasterCard get the card issuer a very small commission, so any points/miles on those are negligible.

• There used to be quite a few local payment systems, and there still are, but in most cases all cards are co-branded with Visa or MasterCard.

• Contactless is ubiquitous. Use your phone rather than a physical card to get rid of the contactless payment limit.

• If someone asks for a 10K blocked deposit for a 2.5K limit, run!