What happens with fraudulent transactions on my credit card? Do the fraudsters win, at the expense of the bank?

Question

I have a credit card account with Barclaycard in the UK. A few weeks back, I wasn't able to log in to view my account online. I called them, and they said the account had been locked due to some suspicious transactions. I spent some time with the agent going through all the transactions, and there were four transactions for several hundred pounds each which I didn't recognise - one for a furniture store, one for nikestore.com and two to some company I've never heard of. The agent said they would post out a form to me that I would have to complete to confirm the transactions weren't mine. It transpired that this form never arrived, but I got several text messages telling me that funds had been refunded, that they were continuing to monitor my account, and finally that my case had been closed.

Today I went through my last couple of PDF monthly statements. The furniture store transaction and the nikestore.com transaction don't appear at all. The other two (£510 and £700) do appear, with corresponding credits.

What I'm simply wondering is - why do these transactions appear, and the other two don't? Have Barclaycard actually paid out on these two transactions and refunded me as a gesture of goodwill? If that's the case, isn't £1210 significant enough to investigate further? I mean, I doubt I am somehow generating profits for Barclaycard in excess of this. Why is credit card fraud so difficult to combat? That furniture order must have had a delivery address. Why can't the police just call around and knock on the door?

Answer 1

There's two ways to effectively refund a customer and reverse a transaction. See my answer here for more details, but it boils down to whether the store has finalized the transaction, which online stores aren't allowed to do until the item has shipped (at least theoretically - sometimes just having a tracking number issued is sufficient "proof" of shipment). One method entirely removes the transaction, while the other just gives you the money back. Sounds like you had two of each here.

As for who ends up eating the loss - that depends on how thoroughly the merchant took the "required" steps to prevent fraud. For example, if your card has a chip, but the merchant only supports swiping cards, then they're liable for any fraudulent transactions made with a card that could have been inserted, because they didn't support more secure methods. Likewise, if the merchant's web store doesn't make you verify with your bank (called 3-D Secure, although each brand has their own name for it), then they're much more likely to be forced to eat the loss, because they weren't as secure as possible.

In the case where the merchant took all appropriate precautions, the bank does just eat the loss. It's in their interest to minimize how often that happens, which is why the various security methods exist. Whether or not they bother doing anything more for a £1210 loss really depends on how frequently this occurs. I don't have any information on that, but I do know that banks routinely deal with transferring millions of pounds (or other currency) per day. Is it worth an employee's time to do any further followup? Average bank teller wage is apparently £10/hr. At that rate, if it takes more than 15 days of an employee's effort, then they'll have paid that employee more than they might recover, and an employee investigating fraud is probably paid higher than that.