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Julie Sherrier

The credit card fraud detection conundrum

It's a Catch-22. Visa and MasterCard policies state merchants are not required to demand identification as a condition of a credit card sale, but then consumers get mad that cashiers aren't doing their due diligence when processing their plastic.

A Houston TV news team recently tested this conundrum by visiting area retailers to see if employees checked a purchaser's identity against the names on the credit cards they used. In their ruse, the news station workers made purchases on each other's plastic to prove that big-name stores make it easy for credit card thieves. Then they ran with the story about how easy it is to use someone else's credit card as no one was asked to prove that they were the actual cardholder.

And the story got results. Apparently, Sears and Kmart will be "retraining" more than 2,100 employees on the proper handling of credit card transactions. But, really, what's "proper," according to Visa and MasterCard, is just checking the signature on the receipt against the signature on the credit card. That's about it.

Here are more interesting Visa and MasterCard credit-card verification rules:

If a card is unsigned, a merchant should not complete the transaction unless proper identification is presented. Why? Because without the signature, the card is officially invalid. Once you sign that card, you are in essence agreeing to all the terms and conditions that card holds. But hold onto your hats, guys, because I'll let you in on a secret: I haven't signed the back of my credit cards or debit card and guess what... They still work. No one checks.

Also, according to Visa and MasterCard, if a card has "See ID" written in the signature space on a credit card, the card is technically invalid since there is no signature.  But that doesn't stop a stop a whole lot of sales from going through, either.

Discover stands out from the crowd in regards to credit card checking policies, as it states in its merchant manual that retailers should ask for government-issued identification for verification, as well as checking signatures.

So, yes, it would appear that the situation is ripe for fraud. But very few people or merchants seem to be all that concerned -- unless, of course, they become a victim of fraud. One of Visa and MasterCard's arguments against ID checking is that since the issuing bank guarantees reimbursement for fraudulent purchases, cardholders shouldn't be all that worried. While they want to prevent fraud, it is a business cost that is passed on. What's even more interesting is that Visa is testing the fraudulent end of the fraud see-saw by OKing a big increase in the number of no-signature transactions. Possession of the card alone will become sufficient for more than 90 percent of transactions because clerks now have no reason to ask you for your card.

So their dirty little secret is that some fraud is acceptable, but not too much.  

See related: Should you write 'See ID,' not sign, back of credit cards?, Visa expands no-signature-required credit card transactions

6 Comment(s)

rama said:

The credit card should be on the list for top 10 most irresistible temptations. LoLz

Seriously, I made the same financial blunder before. You know, overspending via credit cards!

Of all the debt elimination tips out there, I think living simply is still the most applicable. That should keep us away from trouble! ;)


John said:

And probably even more dangerous than this to consumers is the fact that many people (including online merchants) choose not to take notice of 'the dirty little secret of e-commerce', which is:

"Despite all the hype and all the claims to the contrary, the only actual security for credit card information passed online may be the PRAYER offered up every morning by e-commerce merchants, saying 'Please, Lord, let the hackers bother someone else today'!"

The fact is, if the hackers turn their attention to a given e-commerce web site, the odds are exceptionally high that they WILL succeed in stealing credit card information from that site.
There is literally absolutely no way to stop them entirely except by making sure that no c-c data is stored in - or collected by - any server that is connected to the 'Net ... and a surprisingly-small number of e-commerce merchants have even implemented all of the relatively limited protection for online servers that IS available.

Online buyers (and donors) beware! That's YOUR financial health you're putting at risk so casually!


jark said:

i need credit cart in oder to buy my lowrate


Jennifer said:

Photo Credit Cards is what should be issued. It isn't fullproof, but it would go a long way in protecting consumers. I know of at least two people in my family who have had to have new cards issued to them, several times. Everytime it was because the credit card company had discovered a duplicate card had been made.


rama said:

Now that we have The Credit CARD Act of 2009 we, the consumers, will be protected.

One of the provisions of the Credit CARD Act of 2009 is for credit card issuers to notify consumers 45 days ahead of time before they modify consumers' accounts.

That should be one a good form of debt elimination solution.


eric said:

my kohl's card was being used without permission and knowledge. I reported it and they attempted another purchase and it was denied. why was the store not alerted the card was infact STOLEN. Instead of a closed account. And if they were actually alerted it was reported stolen do I have a possible lawsuit against the store


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