Saturday, 23 February 2013

Plastic or Not?


When travelling to a new country or even a new city, deciding how much cash to carry can be a challenge. In some places, you can step out of the airport and onto the subway, into a taxi, into a rental car or onto a city bike with no cash on hand, since credit card machines are everywhere, from parking meters to food trucks. In other destinations, often within the same country, the situation is reversed. On the flip side, using credit cards abroad can mean additional fees and heightened concerns about credit card fraud. Still, in today’s ultra-connected world, many travellers are willing to accept some risk in exchange for the convenience that credit cards grant.
Starting in May, Washington DC will begin requiring all taxis to take credit cards (a mandate that has been delayed several times). Washingtonians and tourists to the US capital have long been frustrated – and vocally so – about the inconveniences associated with DC taxis, many of which only accept cash. But this could very well be because so many other places in the city do take credit cards. In fact, it’s rare to find a store, restaurant, coffee shop or bar that doesn’t accept plastic. Even most parking meters in DC are outfitted for plastic – a perk that only arrived last week in the Arizona city of Phoenix (now home to nearly 600 credit card-reading meters).
Contrast that with New York City, where cabs are among the only places guaranteed to take cards. The city’s iconic yellow taxis, which are regulated by the city, have been required to accept cards since 2007. Other establishments, though, have waxed and waned in their credit-friendliness over the years. In the wake of economic recession, the number of cash-only New York restaurants rose by 19% in 2010,according to a Zagat survey. Why? For the same reason that so many cab drivers – including those in New Orleans – protest credit card mandates: the credit card companies charge fees. For small businesses, those fees can make a significant dent, accounting for5% or 6% of each transaction.
And that’s not the only cost associated with plastic payments. At the start of this year, the Vatican stopped accepting credit cards – and merchants’ preferences had nothing to do with it. Italy’s central bank, Banca d’Italia, decided to block all electronic payments in an effort to increase security and fend off money laundering and tax evasion. The new cash-only rule currently applies to all establishments in theVatican, including museums, shops and restaurants.
Security concerns have led many places in Europe to accept only chip-and-pin credit cards, which causes trouble for travellers with magnetic-stripe cards. Proving more secure, chip-and-pin cards are embedded with microchips and require cardholders to input a personal identification number rather than signing receipts. In countries such as France, Belgium, Switzerland, Britain and the Netherlands, chip-and-pin credit cards are often the only ones accepted at unmanned machines in subway stations, train stations, bike sharing kiosks, parking meters, gas stations, parking garages and other transportation terminals.
On the other hand, efforts to curb criminal activity actually resulted in South Korea becoming one of the most credit card-friendly countries in the world. In the late 1990s, the government threatened to auditbusinesses that would not accept credit cards, fearful of cash-driven black market activity. The government also promoted credit lending to drive consumer spending. Unfortunately, this also led to a massive accumulation of debt; in 2010, the average Korean household’s credit card debt amounted to 155% of its disposable income. Today, the average adult in Korea holds five credit cards.
Meanwhile, in Southeast Asia, Burma is just beginning to welcome credit cards. This month, Visa announced the first electronic credit card reader at the Green Elephant Restaurant in Yangon, Burma’s biggest city. In the past, US-based financial institutions were barred from operating in the country, but now that sanctions have been lifted, Mastercard and Visa are both setting up services there. Visitors who previously had to travel with wads of cash can soon look forward tomerchants accepting credit and debit cards and new ATMs making it possible to take out cash as needed.

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