Christian Democrats in the United States
Domestic Issues - National Debt We are gradually enslaving our descendents toward inevitable tax hikes for debt service, unless we strike a meteor gold rush some day soon. Painful as they may be, we must adopt policies that require us to pay as we go, and have minimum set-asides for payment of interest and principal. History shows that getting our act together results in a stronger economy. We must reign in our out-of-control high-tech military budget without sacrificing basic troop necessities like body armor and armored vehicles. We should also set maximum borrowing caps against the slope of long-term GDP trend under any circumstance, even war, or we will sell ourselves out to foreign creditors at a vulnerable time. Subscribe to Posts [Atom]
Saturday, May 12, 2007
8:51 AM
Most people think that when they see a credit card charge they did not make, that they call up the bank, and the bank takes the loss for the money paid to the merchant.
This is not true — the bank extracts the money from the merchant, plus a fee.
This chargeback fee might be something like $15 per fraudulent charge, at least, that's what it was when I worked selling Internet services.
Where does this fee go? The bank keeps it.
So, banks have a perverse incentive to perpetuate credit card fraud. Credit card fraud makes money for banks. (The house always wins.)
The fee should be imposed to encourage merchants to tighten their operation, but the fee should not go to the banks, it should be claimed by the government, because it's the government who should impose penalties. Those penalties could be used to fund anti-fraud programs or pay debts.
We'd see how long the insecure system of credit account reference numbers lasts before banks develop secure solutions like digital cash. I bet they wouldn't last long.
perverse incentives of credit card fraud
As a sort of economic category let's try this here.Most people think that when they see a credit card charge they did not make, that they call up the bank, and the bank takes the loss for the money paid to the merchant.
This is not true — the bank extracts the money from the merchant, plus a fee.
This chargeback fee might be something like $15 per fraudulent charge, at least, that's what it was when I worked selling Internet services.
Where does this fee go? The bank keeps it.
So, banks have a perverse incentive to perpetuate credit card fraud. Credit card fraud makes money for banks. (The house always wins.)
The fee should be imposed to encourage merchants to tighten their operation, but the fee should not go to the banks, it should be claimed by the government, because it's the government who should impose penalties. Those penalties could be used to fund anti-fraud programs or pay debts.
We'd see how long the insecure system of credit account reference numbers lasts before banks develop secure solutions like digital cash. I bet they wouldn't last long.
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