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Credit card use: The French do it...differently

by Peter Andrew

Your blogger was recently writing about chip-and-PIN credit cards, which are used across Europe and in other territories. And it occurred to him how different credit card use is in some European countries when compared to the U.S. He knows of what he speaks, because he lived for many years in the U.K., and still owns a holiday home in France. Indeed, this is being written in that house.

There will be a pause here while you picture the scene: the way in which the roofs of the chateau's 17th-century turrets glow almost golden at sunset. The elegant terrace where each evening a bottle of perfectly chilled Chablis or Champagne is consumed with exquisite foie gras. The rare black swans that glide effortlessly across the mirrored surface of the private lake. Yeah, right. It's actually a rather shabby and ordinary house, picked up at a time when you could buy French real estate for a 10-franc note and change, in the middle of a tiny town, which in turn is in the middle of … well, nowhere. But now to our story.

Credit cards in France

The French aren't big on credit cards, and you rarely see one being used for day-to-day purchases. Pretty much everyone has a carte bancaire, but those are debit cards. In fact, last year Euromonitor International, a market research company, estimated that there were just 34 million French credit cards in circulation. According to the CIA World Factbook there were an estimated 62.8 million people living in mainland France in July 2011 so we're looking at roughly half a card per head.

Meanwhile, the CIA reckons that the population of the United States at that time was 313 million, while IndexCreditCards.com reports that among them they had 1.4 billion credit cards. That's about 4.5 cards per head.

But if you think the French aren't wild about credit cards, you should look at the Germans. Using the same sources, there were 81.5 million of them in July, but only 4 million credit cards. That's what you call a phobia of plastic.

Credit card use in France

A couple of hundred yards from Chez Andrew is the Magnac Laval branch of Intermarché, a supermarket/gas station franchise. A few years ago, this writer was in the checkout queue there, and in front of him was a British woman trying to pay with an American Express card. It had been issued by American Express's U.K. subsidiary so it was chip-and-PIN compliant, but it was also brand new and the increasingly panicked woman couldn't remember her PIN. In broken French, she begged to be able to sign for the transaction, and mentioned that would be possible in Britain. "Madame," the clerk replied icily, "Vous êtes en France." ("Madam, you're in France.") The woman left without her purchases.

At lunchtime (a mere two hours, 15 minutes) and overnight, the gas station is unattended, but you can pump your own fuel using a card. But only a French-issued one. Since the Channel Tunnel was built, it can take only 20 minutes or so to get your car from the U.K. to France so there are always plenty of Brits driving around. And during the summer there are one of two of these most days trying and failing to pump gas using a chip-and-PIN compliant "foreign" card.

The point of these stories? You're likely to encounter some problems if you try to use American credit cards in France, and especially if yours lack chips. So carry some extra local currency to cover such situations.

Credit card debt in France

One of the reasons the French may be less than keen to be customers of credit card companies is their apparent aversion to debt. Whether this is because the people themselves don't want to borrow or because their banks refuse to lend them much is unclear. But when the credit crunch hit in 2008, the BBC reported on the exposure of French banks to the crisis. Its journalist concluded:

If I had to use one word to describe France's financial system, the word I would choose would be "cautious". French banks are immensely careful about whom they lend money to and, to limit risks, they spread their investments much more widely than those in the U.S. or U.K.

The BBC went on to say that French household debt (including credit card debt) as a proportion of GDP was 47 percent in 2008, which was roughly half that of both the U.S. and U.K.

So do American banks and credit card companies have much to learn from their French counterparts? Well, maybe. While U.S. banks were lending too much to consumers, those in France took a more prudent route, putting their money instead into safe investments, such as Greek government debt. Oops.

Published 10/10/11 (Modified 10/13/11)

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