Lifting Cuba restrictions means easier credit, debit use
By Martin Merzer | Published: December 19, 2014
American visitors to Cuba soon should be able to use at least some of their credit cards and even debit cards, now that the U.S. trade embargo is being eased and the two nations are moving toward normalized economic and diplomatic relations.
Though market opportunities might be limited at the outset, industry experts said U.S. credit card issuers are virtually certain to establish beachheads in Cuba as soon as the Obama administration issues a new set of regulations.
"As to when a U.S. traveler could walk into a bar and use a card issued by a U.S. entity, I would guess this would be shortly after Congress approves any embargo lift or as soon as both governments indicate approval for U.S. interests operating within Cuba's borders," said Mark Ranta, senior solutions consultant for ACI Worldwide, which helps process credit card and other payments for thousands of financial institutions and retailers around the world.
A full lifting by Congress of the decades-old embargo is not within sight, but both governments are working out ways to relax elements of those trade and financial restrictions. This will include allowing, for the first time in more than 50 years, the use of U.S.-issued credit cards, debit cards and other financial instruments by the growing numbers of Americans who will be visiting Cuba.
Currently, foreign visitors to Cuba need to carry large amounts of cash into the country or they can use credit cards issued by banks not based in the United States. Thus, very few Americans are able to use credit or debit cards in Cuba.
"The block on current U.S.-based cards is tied to the embargo, so if a credit card is issued by a U.S. entity, it would not validate upon use by design so the entity can't be held responsible for breaking the embargo," Ranta said.
But, with detente underway, this is about to change.
"We will be issuing new regulations to allow U.S. banks to establish correspondent accounts with Cuban banks," a senior Obama administration official, who declined to be identified by name or position, told reporters when the diplomatic and economic breakthrough was announced Dec. 17. "U.S. financial institutions will also be authorized to facilitate the use of U.S. credit and debit cards by travelers in Cuba.
"These changes will ease the flow of remittances to, and authorize transactions with, the Cuban people," the official said. "This also means that those who do trade with Cuba -- for example, in the areas of agricultural medicine and medical products, telecommunications, etc. -- will have a much easier time doing so."
100,000 Americans already visit
Cuban officials say that about 100,000 American diplomats, journalists, cultural figures, contractors and others (including tourists who evade U.S. travel restrictions) visit Cuba annually. In addition, as many as 350,000 Cuban-Americans reportedly visit relatives in the country each year. Travel experts said the number of U.S. citizens who arrive in Cuba could explode into the millions practically overnight if the Obama administration's moves eventually lead to full revoking of the embargo and its associated travel restrictions.
With that in mind, U.S. credit card issuers are studying the regulatory and financial lay of the land -- and they are beginning to plan their entries into Cuba,
We welcome this week's announcement that U.S.-issued credit and debit cards will soon be able to be used in Cuba.
|-- James Issokson
"We welcome this week's announcement that U.S.-issued credit and debit cards will soon be able to be used in Cuba," said James Issokson, a spokesman for MasterCard. "We look forward to the guidance from [federal officials] on the timelines and the process to make this a reality for our cardholders."
A spokesman for Discover said it was too early for specific comment, a spokesman for American Express declined to comment, and representatives of Visa did not immediately respond to requests for comment, but industry experts said all four firms almost certainly were on the case.
The new opening is especially important to American Express and Discover. Both firms have been completely locked out of Cuba because they are U.S.-based companies that directly issue their credit cards rather than distributing them through partner banks, some of which are located overseas.
"Hopefully, the banks have already started exploring their next steps, so the perceived time it will take can shorten dramatically," Ranta said. "As for the cards being accepted, I don't think that process would take long after the official OK is given. My educated guess is a few weeks."
Regulations being drafted
The Obama administration said that the Office of Foreign Access Control, a branch of the U.S. Department of the Treasury, is actively working on new regulations. "I expect to see those changes in the coming weeks," a senior administration official said.
Under the new policy, Americans still will not be allowed to visit Cuba strictly as tourists -- that must wait for congressional action -- but the White House is easing the regulations associated with travel by Americans who do qualify under the existing 12 categories of legal travel.
Those categories are: family visits; official business of the U.S. government, foreign governments and international organizations; journalism; professional research and meetings; educational activities; religious activities; support for the Cuban people; humanitarian projects; activities of private foundations; research or educational institutes; art or athletic performances; export-import.
Any American visiting Cuba under those regulatory umbrellas will be allowed to bring back up to $400 in goods, including up to $100 in alcohol or tobacco products.
And that's where the new policy allowing the use of U.S.-issued credit cards will come in handy.
"There will be greater people-to-people engagement and travel opportunity," a senior Obama administration official said. "There will be the ability for the American people to use credit and debit cards when they travel to Cuba."See related: New to U.S.? A primer on how to create, build a credit history, Preparing your cards for overseas travel
- CFPB rule: Consumers should be able to band together and sue – Banks, GOP oppose measure that would end "mandatory arbitration" clauses that prevented class-action suits ...
- Bluesnarfing is newest card fraud at gas pumps and ATMs – With a skimmer and Bluetooth technology, fraudsters can sit nearby and intercept your payment transaction details ...
- TransUnion to pay $60 million to consumers flagged as criminals – A jury sided with a consumer who claimed TransUnion violated federal law over OFAC alerts ...