How Much Does Fraud Cost Credit Card Companies

Mogul of Pineapples · 04:55 PM

I came across this and it's from 2004:

The credit card industry loses approximately $2 billion annually due to credit card fraud worldwide.

Visa and MasterCard do not disclose the exact dollar value of how much they lose to fraud but they do admit it is about 7 cents for every $100 in transactions.

The current 2008 numbers for their revenues are:
Visa = $6.3 billion
MasterCard = $4.8 billion
Amex = $3.4 billion
Discover = $2.6 billion
--------------------
Total: $17.1 billion

I don't know how they exactly tally the fraud and who eats the losses but if it's the 4 listed above, that's a high portion of their revenue. $2 billion ('04) out of $17.1 billion revenue ('08). But since the fraud number is from '04 it would be even higher now. If we were to answer how much does credit card fraud cost the industry it looks like that would probably be somewhere between 10% and 15% of their revenue. Are my rough calculations in the ball park?

Floppster · 06:41 PM

Lets face it, it is not the Bank which gets screwed at the end. It is the merchant.

sputNick · 06:58 PM

Credit card fraud - the 2nd biggest scam besides the US govt!

I'm not 100% sure on this but I think that the merchant gets their money no matter what- legit or fraudulent charge.

Cucumber · 12:17 AM

Obviously since we ultimately pay to use the credit cards in transaction fees then that means WE are paying for the fraud!

magyar1045 · 08:52 AM

Quote:

Originally Posted by sputNick

Credit card fraud - the 2nd biggest scam besides the US govt!

I'm not 100% sure on this but I think that the merchant gets their money no matter what- legit or fraudulent charge.

Not really - it's the merchants hurting. Say you lose your credit card and someone fraudulently uses it. You notice that transaction and dispute it with your cc company. The cc company wants to keep you happy so they reverse the charge and do a chargeback to the merchant. Bingo - the cc thief has the item he/she purchased, but the merchant is out that money because the cc company performed a chargeback.

Floppster · 04:09 PM

Quote:

Originally Posted by magyar1045

Not really - it's the merchants hurting. Say you lose your credit card and someone fraudulently uses it. You notice that transaction and dispute it with your cc company. The cc company wants to keep you happy so they reverse the charge and do a chargeback to the merchant. Bingo - the cc thief has the item he/she purchased, but the merchant is out that money because the cc company performed a chargeback.

Yep that is exactly the problem. The merchant is out of the money...

Cucumber · 11:21 PM

I looked this up and everyone here is both right and wrong.

The merchant usually pays for the fraud if it was online, over the phone or internet.

The merchant is not responsible though if the purchase was face to face. If the crook had the card and used it in person at a store then the credit card co. always pays for it.

That would mean online sites like Amazon and Paypal must get hit hard with fraud.

fffresh · 04:37 PM

That would mean that brick and mortar stores have no to little risk. With that said, it's ironic how they are who hassle us for ID.

sputNick · 10:46 PM

That seems kind of stupid that stores are not responsible but online stores are.

Where is the logic in that. Because there is a signature at a store? How about the online stores that take your "digital signature' shouldn't those count as a signature?

To me it sounds like an outdated policy that needs to be updated. It's 2008, almost 2009! Some people purchase most of their pricey things like computers and TVs online only. I think Visa/MC/Amex/Discover are lagging on updating this rule because it saves them money and means they have to pay out less out of pocket.

KC95 · 02:22 AM

what about debit cards? if they are losing that much then how is it that debit cards exist and the fees the sellers pay on them are so low.

obviously someone is making a killing on the fee and i think their first name is master and their last name is card.

04:55 PM	#1
Mogul of Pineapples Centurion Member Join Date: Jun 2008 Location: Where the smog from the 101 freeway coats my home's windows... Posts: 634	How Much Does Fraud Cost Credit Card Companies I came across this and it's from 2004: The credit card industry loses approximately $2 billion annually due to credit card fraud worldwide. Visa and MasterCard do not disclose the exact dollar value of how much they lose to fraud but they do admit it is about 7 cents for every $100 in transactions. The current 2008 numbers for their revenues are: Visa = $6.3 billion MasterCard = $4.8 billion Amex = $3.4 billion Discover = $2.6 billion -------------------- Total: $17.1 billion I don't know how they exactly tally the fraud and who eats the losses but if it's the 4 listed above, that's a high portion of their revenue. $2 billion ('04) out of $17.1 billion revenue ('08). But since the fraud number is from '04 it would be even higher now. If we were to answer how much does credit card fraud cost the industry it looks like that would probably be somewhere between 10% and 15% of their revenue. Are my rough calculations in the ball park? __________________ “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.” -Warren Buffett Current Cards: American Express: Blue Cash, Simply Cash Bank of America: Visa Financial Rewards Platinum Plus Chase: Rewards Visa, Amazon Visa Discover: More Current Everyday Card: American Express Blue Cash Last edited by Mogul of Pineapples : 11-17-2008 at 04:58 PM.

06:41 PM	#2
Floppster Centurion Member Join Date: Sep 2008 Location: US Posts: 189	Lets face it, it is not the Bank which gets screwed at the end. It is the merchant. __________________ Intellectuals solve problems. Geniuses prevent them. - Albert Einstein 1879-1955

12:17 AM	#4
Cucumber Centurion Member Join Date: Apr 2008 Location: Zuma Posts: 453	Obviously since we ultimately pay to use the credit cards in transaction fees then that means WE are paying for the fraud! __________________ OBAMA Stop talking crap about him and give him a chance!

11:21 PM	#7
Cucumber Centurion Member Join Date: Apr 2008 Location: Zuma Posts: 453	who pays for credit card fraud - both!!! I looked this up and everyone here is both right and wrong. The merchant usually pays for the fraud if it was online, over the phone or internet. The merchant is not responsible though if the purchase was face to face. If the crook had the card and used it in person at a store then the credit card co. always pays for it. That would mean online sites like Amazon and Paypal must get hit hard with fraud. __________________ OBAMA Stop talking crap about him and give him a chance! Last edited by Cucumber : 11-18-2008 at 11:29 PM.

10:46 PM	#9
sputNick Gold Member Join Date: Oct 2008 Location: Midwest Posts: 41	That seems kind of stupid that stores are not responsible but online stores are. Where is the logic in that. Because there is a signature at a store? How about the online stores that take your "digital signature' shouldn't those count as a signature? To me it sounds like an outdated policy that needs to be updated. It's 2008, almost 2009! Some people purchase most of their pricey things like computers and TVs online only. I think Visa/MC/Amex/Discover are lagging on updating this rule because it saves them money and means they have to pay out less out of pocket. Last edited by sputNick : 11-26-2008 at 10:50 PM.

06:58 PM	#3
sputNick Gold Member Join Date: Oct 2008 Location: Midwest Posts: 41	Credit card fraud - the 2nd biggest scam besides the US govt! I'm not 100% sure on this but I think that the merchant gets their money no matter what- legit or fraudulent charge.

04:37 PM	#8
fffresh Centurion Member Join Date: Apr 2008 Location: the edge of the world Posts: 417	That would mean that brick and mortar stores have no to little risk. With that said, it's ironic how they are who hassle us for ID.

02:22 AM	#10
KC95 Platinum Member Join Date: Apr 2008 Location: cc Posts: 80	what about debit cards? if they are losing that much then how is it that debit cards exist and the fees the sellers pay on them are so low. obviously someone is making a killing on the fee and i think their first name is master and their last name is card.

Thread Tools
Show Printable Version Email this Page
Display Modes
Linear Mode Switch to Hybrid Mode Switch to Threaded Mode