Thread: 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
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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?

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

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

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...

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.

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To me it sounds like an outdated policy that needs to be updated.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.