The cost of theft: Citizens pay for credit card theft through higher banking, card fees

In these days of quick and easy credit card purchases of everything from gasoline at the pump to movie tickets on “Fandango,” fear of credit card theft is never far away.

“For years I’ve thought this is stupid,” said a recent local victim of credit card theft who asked not to be identified. She believes that businesses invite theft when they do not require signatures for credit card purchases — such as at a gas pump — so that the signature can be verified by a clerk. “It drives me nuts,” she said.

But credit card theft may not be the growing problem we often are told it is.

“Credit card fraud … is on the decline,” writes Indiana University professor Fred H. Cate, director of the IU Center for Applied Cybersecurity Research.

The total cost of credit card fraud fell 10 percent, to $788 million from $882 million, between 2003 and 2004, and fraudulent charges are lower as a percentage of total card use in the United States than anywhere else in the world, Cate writes.

Nevertheless, credit card fraud remains a serious and expensive problem.

“There’s no doubt that financial institutions as a group are losing millions and millions of dollars” to credit card theft, said Pete Piazza, vice president of lending at the Indiana State University Credit Union, which, like many banking institutions, issues its own credit cards. “It’s a huge problem,” he said.

By law, card holders are not liable for more than $50 in losses from credit card fraud and banks seldom, if ever, pursue even that amount, Piazza said. In most cases of credit card fraud, the issuing banks absorb the costs. Additionally, banks have higher operating costs because of credit card fraud. The ISU Federal Credit Union, for example, has a full-time employee devoted primarily to handling credit card fraud problems, Piazza said.

And of course, all these costs ultimately are passed on to the consumer in the form of higher prices, reduced services and lost jobs, Cate writes.