So why is it credit card companies tolerate so much fraud?

Faughnan's Notes: CC Fraud Take II

While I work through the 7K of fraudulent charges on my AMEX card, I have the opportunity to think again about how the basic infrastructure of credit card security seems little changed from my experience 7 years ago.

An NPR Morning Edition story fills in the blanks. VISA/MC and AMEX are very, very profitable endeavors. They probably pull in 75 billion every year on interest payments alone; then add atop that 1-2% of most retail transactions. In other words, they have money to burn.

Let's say they put a system in place that made fraud much more difficult. All the solutions I know of would make online purchases somewhat more difficult -- OR they would open the door to non-credit card alternatives. Either way, I bet it would cost the card industry billions. If an alternative to credit cards emerged, it could cost the card industry tens of billions of dollars every year.

Even today, that's a lot of money.

Far better to lose a few billion to fraudulent transactions every year. Since they probably only lose less than a hundred million dollars a year, credit card fraud will be a growth industry for years to come. If the only factor were economic, I'd guess fraud could be more than 10 times as common as it is now, meaning each year most of us would see some fraudulent activity on our statements.