Debit and Credit Cards in Iceland

The use of debit and credit cards has revolutionalised travel, making online bookings for flights and accommodation a straightforward and convenient method of arranging your own tour itinerary. To be able to rent a car, you could be forgiven for thinking that it’s essential to have a credit card. Actually, sometimes, that isn’t the case, and you can complete the formalities of your rental with a debit card as you’ll see later in this article.

What’s the difference between credit and debit cards?

While both credit and debit cards are widely accepted across Iceland, the way they’re used does vary in certain ways, as is the case in other countries too. Broadly speaking, when you use a debit card, the money is taken straight from your bank account. There are advantages to this: it’s easy to keep track of your spending and thus make sure that you don’t run through more than the sum of money that’s in your account.

However, with a credit card, you make purchases against a line of credit. That can be paid off in full when your monthly bill comes in, or carried over with the addition of a pre-determined rate of interest. Some people are wary of this option. If you aren’t good at keeping track of your spending, it can be easy to rack up a large bill surprisingly quickly. If you don’t have enough money in your bank account to cover the cost of your purchases, the outstanding balance is carried over and incurs interest. Pay only the minimum amount requested and you could find that the number of debt increases. Paying it off in full is the best idea, period.

Take advantage of consumer protection

However, there are advantages with using credit cards that you just don’t qualify for if you use a debit card. Savvy travellers will know that credit cards offer a certain amount of consumer protection. Make a transaction above a fixed amount – in the UK, for instance, it’s £100 – and you’re covered if there’s an issue that leads to the supplier failing to deliver on the service they’ve promised. An airline failure meaning your flight is cancelled would be one such example. In this respect, using a credit card rather than a debit card gives the payee a level of insurance and mitigates risk. Basically, the credit card company takes over the risk on your behalf and refunds the charge.

That’s also the case if your credit card is fraudulently used; the liability lies with the card issuer. However, it should it’s worth mentioning at this point that the way we use credit and debit cards has evolved. Many of us now hold a chip and pin card, whereby to use them we need to remember a four-digit code which we input into a handheld device in order for the transaction to be authorised. Although pin numbers can be a pain to memorise, they offer a level of protection beyond that once afforded by an easy-to-forge signature. In that respect, getting out your debit card is safer than it perhaps was in the past.

Always carry a couple of chip and pin cards

Chip cards are accepted throughout Iceland. Credit card companies such as American Express, Visa and MasterCard work hard to ensure that their cards are accepted in as many locations as possible. For both Visa and MasterCard, you’re unlikely to encounter a problem as most places allow you to pay with them. Note, though, that typically American Express cards can be used in fewer places. Regardless, it’s sensible to carry two differently branded cards in case one isn’t accepted, or a transaction is declined for some reason.

Chip cards are also an essential piece of kit for Icelandic road trips. Gas stations accept debit and credit cards, though it’s always useful to carry sufficient cash to pay for a tank of fuel just in case of a problem. Where pay at pump exists, you can opt to fill up or choose to authorise a set amount, such as 5000ISK or 10000ISK. Some travellers prefer to do the latter to ensure that they don’t run out of credit. Those pre-authorised amounts do get cleared eventually, but it can take several days or more, and in the meantime that ring-fenced money can’t be used for other purchases even though strictly speaking it hasn’t all been required at the pump.

Using a card to get cash

For businesses which don’t accept cards, usually small-scale independent operators, visitors can use their card at ATMs to withdraw cash. You’ll need to enter your pin number to do so. It’s clear from the on-screen instructions how to proceed; at some stage there’ll be an option to select your checking account or credit option. Always cover your pin as you enter it and be aware of what’s happening around you, even in a very safe country such as Iceland.

Something else that’s important is this: whether a debit or credit card is used for a cash advance or for purchases, it is the card issuer that will calculate the exchange rate. This may differ from the published bank rate on the day of the transaction, but rarely by very much. You’ll see the rate and any fees displayed on your statement. Those foreign transaction fees are applied for cash advances, so it’s more cost-effective to withdraw one larger amount than two smaller amounts. Currency exchange rates do vary from day to day so keep an eye on the official rates online, at the bank or bureau de change to keep abreast of such changes.

Is it necessary to have a credit card for a rental in Iceland?

When it comes to car rentals, it’s a commonly held misconception that you must hold a credit card. Though that’s often the case, it’s not universally so. You can actually use a debit card for your camper or RV rental with some Iceland agencies. For example, in our case, we accept debit cards. However, that’s only the case for certain vehicle models and in cases when our customer takes out a more comprehensive insurance option than the standard policy.

If you don’t hold a credit card, it’s worth giving customer service a call or dropping us an email to see what your choices are. And of course, if you are planning to travel but don’t currently have a credit card, you could always consider filling out an application form for one a couple of months before you’re due to travel. Most adult applications are accepted. If you don’t like the idea of going into debt then so long as you ensure the bill is settled in full before the due date you wouldn’t be liable for interest charges.

As you can see, carrying a card in Iceland for your holiday purchases, whether that’s flights, accommodation, car rentals or excursions, can be very advantageous. Whether that’s a debit card, credit card or one of each is down to you.