Manifesto Multilinko
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Sunday, November 02, 2008
credit card companies use chip cards to gouge retailers and shift liability

Ah yes, the new credit cards with chips, so super-duper secure.
Nice little bit of security theatre there.

Theatre aside the reality of the new chip card is:

1. The need to enter a PIN number means you can no longer sit at your restaurant table and sign some bill that disappears off somewhere. The retailer either has to get a wireless payment unit (which they get charged some outrageous fee for, like $200 a month), or everyone has to troop up to the front desk to pay.

2. The super-duper-high-security of entering a PIN number is giving the credit card companies an excuse to move from their current position where you have zero liability for any unauthorized credit card purchases (e.g. from stolen card) to new improved position where you, the consumer, are 100% liable for purchases made by thieves and fraudsters with your card.

Also, and for the first time ever, I wasn't able to complete a credit card transaction yesterday because the machine didn't accept my PIN, it wasn't clear if it was reading the card correctly or what the problem was. Tried 3 times and same problem each time.

As a bonus, because the above two don't screw over people and retailers enough, the new "Infinity" cards have added features that are funded by... charging the retailers a higher transaction fee. (Note: retailers are not allowed to either refuse to accept the cards, or pass the transaction percentage along to consumers.)

So keep in mind that in exchange for the convenience of using your credit card (and I will admit I use mine for almost all transactions) you introduce a substantial transaction cost into the economy, because of the percentage that the card companies skim off of retailers both for each transaction, and for the associated equipment.

Will cardholders still have a guarantee of zero liability for unauthorized transactions?

Or will financial institutions treat credit card fraud as they treat debit card fraud, applying harsh penalties to those considered to have abused their PINs?

In recent months, major banks have sent new terms and conditions to credit cardholders. They seem to be reneging on the zero liability guarantee.

If you don't safeguard your personal identification number and someone makes a PIN-based transaction on your Visa account, you will be "liable for those transactions and interest, fees and losses incurred," says CIBC Visa.


TD Visa says you're responsible for the full amount of all unauthorized activity that occurs "if your PIN, password or card may have become known to an unauthorized person."

New credit cards - The Toronto Star - November 2, 2008


"Canadians pay among the highest credit card fees in the world," said Diane Brisebois, president and CEO of the retail council. "We're one of the few countries in the world where the government hasn't seriously looked at this and decided to regulate."


At issue are so-called "interchange" fees, the amount the stores pay to the credit card companies to accept their cards in their stores.

Such fees are invisible to the consumer but can cost the retailer on average 2 per cent of the value of each transaction, Brisebois said.

In fact, consumers are unwitting dupes in new schemes by the credit card companies to raise merchants' fees, said Catherine Swift, president and CEO of the federation of independent business.

For example, many Canadians have received new "premium" cards in the mail, such as the Visa Aerogold Infinite card. The card comes with additional perks, such as travel insurance, at no additional cost to the cardholder.

Instead, the card companies charge merchants higher transaction fees when customers use these new cards, Swift said.

Retailers urge action on credit card fees - The Toronto Star - September 11, 2008

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