After Target Heist, Credit Cards Set for an Overhaul

by Luke Jones  on Monday, Jan. 27, 2014 12:00 am  

“It’s reached a turning point, a melting point,” he said. “It’s not going to go away if something’s not done.”

Preventing Fraud

Target’s data fraud also highlighted just how vast the depths of credit card fraud can reach.

In the low-interest environment, Arnold said, banks’ method of profiting from cards has swung from interest charged on credit card balances to merchant fees generated at the point of sale.

But, Arnold said, that market is in danger if fraud continues to make people worried about their identities being stolen.

“That needs to be urgently addressed,” he said.

“For the [card] industry, in my estimation, it’s the biggest threat to be faced in many, many years.”

On the consumer side, fraud isn’t as big a deal as it might seem. Oxman said fraud losses from credit cards account for less than 6 cents out of every $100 spent.

Federal law makes customers liable only up to $50 of a fraudulent charge, provided they give notice quickly enough, and major card companies usually free customers from liability entirely.

“You’ve got all these industries that realize that fraud is a great threat to their business models and have all these different policies so that, in effect, card owners have zero liability,” Arnold said.

“Which is a good thing. It does give cardholders and consumers some reassurance, but somebody’s got to eat all that fraud. If consumers are not eating it, who’s eating it?”

The answer is, of course, banks.



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