Credit and debit cards in the U.S. use old magnetic stripe technology. The magnetic stripe is the black or brown band on the back of your credit or debit card. Tiny, iron-based magnetic particles in this band store data such as your account number. When the card is swiped through a “reader,” the data stored on the magnetic stripe is accessed. Card readers and magnetic stripe technology are inexpensive and readily available, making the technology highly vulnerable to fraud.

One extremely prevalent example of such fraud is ATM skimming. Skimming occurs when a criminal copies the data stored on your card’s magnetic stripe and burns the stolen data onto a blank card, creating a clone can that be used like any normal credit or debit card.

According to the Smart Card Alliance, twenty-two countries, including China, India, Japan, Mexico, Canada, and many in Western Europe and Latin America, are migrating to encrypted microprocessor chip and PIN technology for credit and debit payments. These new “smart cards” contain an embedded microchip and are authenticated using a personal identification number, or PIN. When a customer uses a smart card to make a purchase, the card is placed into a “PIN pad” terminal or a modified swipe-card reader, which accesses the card’s microchip and verifies the card’s authenticity. The customer then enters a four digit PIN, which is checked against the PIN stored on the card.

The U.S. has yet to adopt the new smart card technology, possibly due to the higher cost. According to consulting firm Javelin Strategy & Research, converting to chip and PIN technology would cost the U.S. payment card industry about $8.6 billion, which doesn’t sound so expensive to me, considering that identity theft is a reported $50 billion problem.

U.S. travelers are encountering difficulties when attempting to use old magnetic stripe credit and debit cards abroad, since their cards do not contain the new microchips. This is especially problematic at automated kiosks, which are common in Europe. Vending machines at regional rail stations, bicycle rental racks in Paris, parking meters in parts of London, toll roads, and gas stations only accept chip and PIN cards. Visa claims that most payment terminals in countries that have adopted chip payment technology can still process old magnetic stripe U.S. cards, and, “in the rare instance that a card holder encounters a problem” at a self-service machine, Visa advises American travelers to present their cards to attendants.

My dad has U.S.-based magnetic striped cards, and he travels all over Europe and has yet to encounter a problem paying at a restaurant or in any scenario in which the card is processed by a person. However, CreditCards.com reports that the European Payments Council, the governing body responsible for achieving a single payments market throughout Europe, is considering a ban on old technology magnetic stripe cards. This would cause major commerce problems in Europe and raises the question of whether U.S. credit card merchants will make the switch.

In the meantime, if you travel to Europe, make sure to carry cash. And if you are likely to use a kiosk that can only process cards with chip and PIN technology, do your homework ahead of time to determine whether an alternative payment methods is available.

Robert Siciliano, personal security and identity theft expert adviser to Just Ask Gemalto, discusses credit and debit card fraud on CNBC. (Disclosures)

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