Saturday, February 20, 2010

Credit Card Purchases Under $25 and Risks

You may have noticed the increasing trend for merchants to allow credit card purchases under $25 to be approved without a signature and in some cases without providing a receipt. When this first happened to me I asked to sign the receipt and was told that my signature was not required which bothered me greatly. I feel merchants should post a sign informing consumers that purchases under $25 do not require a signature and include this in the consumer disclosure agreement.

In July 2010 Visa will increase usage of its No Signature Required program which began in 2003 to 98% of merchants because they feel it will offer merchants more payment options. Some of the retailers included are: department stores, book stores, hair salons, drug stores, electronic stores, car washes, sporting goods stores, parking lots and garages, fast food restaurants, movie theaters, restaurants, dry cleaners, gas stations, taxicabs and more.

MasterCard has a similar program where no signature is required and a receipt is optional for transactions between $15 to $50 depending on the merchant. MasterCard also has a PayPass and Go Card which is a contactless that can be used at merchants where their symbol is displayed and can also be used at regular checkouts. Your signature is not required for purchases of $50 or less.

Credit card companies feel that no-signature transactions will speed up checkout and encourage consumers to make more everyday purchases with credit cards. I feel this increases the chances of identity theft since a thief could make several small purchases which could go undetected.

Visa offers zero liability if you report the fraudulent charge within 5 business days. MasterCard offers zero liability based on certain conditions.
Merchants feel that consumers will not bother to dispute transactions under $25 but is that fair to consumers. Visa's website states that "Underpinning digital currency is one of the world's most advanced processing networks VisaNet that is capable of handling more than 10,000 transactions a second, with fraud protection for consumers and guaranteed payment for merchants. Really, so how exactly does Visa plan to protect consumers for fraudulent transactions under $25?

For purchases over $25 if a person is a victim of identity theft many banks use signature comparison as a method to prove the transaction with a theft. For purchases under $25, how can a consumer prove that the transaction was fraudulent?

Banks can use other forms of identification to verify the consumer, like your SSN or Date of Birth but if the thief has your SSN and date of birth that doesn't work. If you have a very smart thief who also has your mailing address how will Visa prove your identity? I suppose they could verify by your account number but the thief has that too, or maybe by the last transaction made. One would have to dig through their receipts to find the last transaction made. If a dispute is found exactly how will it be handled?

If you have been a victim of identity theft like I have and want to decrease your chances of identity theft, consider making purchases under $25 with cash instead of with a credit card or Visa check card.

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