How Much Does Fraud Cost Credit Card Companies

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Mogul of Pineapples
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How Much Does Fraud Cost Credit Card Companies

Postby Mogul of Pineapples » Mon Nov 17, 2008 6:55 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?
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Postby Floppster » Mon Nov 17, 2008 8:41 pm

Lets face it, it is not the Bank which gets screwed at the end. It is the merchant.
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sputNick
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Postby sputNick » Mon Nov 17, 2008 8:58 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.


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Postby Cucumber » Tue Nov 18, 2008 2:17 am

Obviously since we ultimately pay to use the credit cards in transaction fees then that means WE are paying for the fraud! :mad:
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Postby magyar1045 » Tue Nov 18, 2008 10:52 am

sputNick wrote: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.

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Postby Floppster » Tue Nov 18, 2008 6:09 pm

magyar1045 wrote: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...
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Cucumber
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who pays for credit card fraud - both!!!

Postby Cucumber » Wed Nov 19, 2008 1:21 am

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

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.
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Postby fffresh » Wed Nov 19, 2008 6:37 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.

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Postby sputNick » Thu Nov 27, 2008 12:46 am

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.

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Postby KC95 » Thu Dec 04, 2008 4:22 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.

;)



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