Why should the merchant ever be liable unless they’re negligent? If they allow the transaction, at the very least they should recover the merchants costs.

Otherwise it’s a big conflict of interest. What’s their motivation for security other than credibility? Not being on the hook sure does alleviate a lot of risk…

I agree. And what’s even more interesting is that credit card companies has more information on whether a particular transaction is fraudulent or not than a merchant can ever expect to know. For example a merchant doesn’t have the recent history of transactions, they don’t know the spending habits, etc. The best they can really do is a few verifications and authorization from credit card company.

From a merchant’s perspective, I believe that if the credit card company authorizes the credit card, with all the information required, the the burden of fraud should be shifted to their shoulders.

What would happen if this were the case is that the credit card companies would say no more often. That or they would increase their security. In either case everyone wins. Yes the consumer may have to use alternative modes of purchasing, but they would quickly put pressure on the credit card companies to increase their security.

If it was such a prevalent mode of purchasing by the consumer and sales by the merchants, it would be great to have all merchants for one day not take a credit card but do a cash only day.

My apologies.

I think you may have misunderstood my post, I totally agree with you.
I meant that the $11 would be better spent by the banks to prevent the fraudulent purchases in the first place.

I would disagree with you has to who’s responsibility is to prevent fraud. The bank and not the seller should be responsible for preventing fraud. Of course if the seller is being stupid than that’s another story. But in general it should be the bank.

Here’s why. How as a seller can I know which cards are fake and which one’s aren’t? I don’t have nearly the amount of information at my hands that the credit card companies do. But not only that, I can’t possibly be asked to keep up with all of the credit card features out there. There’s just no way.

But what’s worse is that the credit card companies themselves have authorized the purchase. Once they do that the onus should then be put on them, not the seller. The seller has done everything asked of them, and done it right. The credit card company has said yes, this is valid. You’re then giving away your product. And then a month later the credit card company takes back it’s money, to something they approved!

Now as a seller I’m out both the money and the product. That’s horrible, especially when the credit card company gave me the authorization to process the credit card. They said it was valid and the funds were there.

Where else is this even legal? If you go to a store, purchase a product, can the store just come to your home and take it back from you a month later? I’d like to see that. With credit card companies this is normal.

Btw, this is also the reason there are a lot of class action lawsuits right now from merchants against the big credit card companies. And this is also why there is still a lot of credit card fraud, and why it won’t go away anytime soon. It’ll only get worse until consumer confidence erodes to the point where the credit card companies have to do something.

Would that $11 not be better spent preventing the fraudulent purchase in the first place?

The vast majority of these chargebacks are preventable, but again it is the seller that has to try and prevent them, not the credit card companies.

But for almost every other merchant, regardless of that, what is proper shipping documentation? In this day and age, many of the fraudulent purchases also have bogus shipping addresses. If it’s a 100% online transaction (downloadable only) then that can be faked. The only protection is when you need to physically mail something, which is only about 10% of our orders.

So for us here, the question is do we pay for a service where it’s almost break even with the fraud loss… Once you factor in the development costs, maintenance, and potential loss sales, it’s probably not worth it.

The big issue for me though is that it’s frustrating when the motivation for the credit card is not really aligned to fully protect people and companies from credit card fraud. It’s only there as much as they can maintain their credibility, not any more. And this is why credit fraud is so rampant and will not go away. Until they are directly responsible for the loss, the motivation is just not there to eliminate it, only reduce it.