Monday, August 16, 2004

More truth about credit cards

Credit cards are a 50 year old technology. Sure, there have been some incidental improvements, but on the whole, a 16-digit number and a signature are a crappy way to assure payment to anyone in the 21st century.

Look at my posts previously about credit cards and identification. Banks and merchants are trying desperately to keep what is effectively an ancient banking tool afloat, by tweaking the rules here and there and screwing each other in the process. The result is that to avoid inconveniencing consumers, small businesspeople are getting screwed. The merchants, in return, skirt the rules, balancing consumer convenience versus their own self-interest, occasionally getting into trouble, occasionally losing a customer, and rarely actually preventing the problem.

The solution is painful, but such is the way with revolution. Consumers must force merchants to comply with the rules. Eventually, without the placebo of requesting ID, merchants will be forced to take the bull by the horns, and either take action against the banks for reversing charges on authorized payments, or stop accepting credit cards. Either way, the banks will start to feel the pain.

Banks, in return, will be forced to finally research and adopt new transaction processing tools that are genuinely friendly to all involved, instead of leaving merchants as the scapegoat.

Invention comes from pain. We, as the protected consumer class in this story, are in the best position to bring pain to the merchants and banks. In the end, we will have to give up our credit cards, but they will be replaced with something better because if it.

Let’s be honest for a moment…

I’ve received some e-mails in the brief time my post about credit cards and identification has been up, from merchants positive they have the right to require ID, and moreso, are doing everyone a favor by it.

Bullshit.

I’m about to expose your secret. You may know it already, or this might pop that little lightbulb on over your head. But this is the reason merchants want to demand ID to accept credit cards, and for some reason, they don’t want to tell you:

Their wallet.

Yup. Merchants are the losers when crooks use stolen credit cards. Hell, even when assholes use their own credit cards then decide they don’t want to pay for the goodies. We, the consumers, are protected all over the place. By federal law, our liability for bad charges is $50, but most credit card issuers put it at zero. But the banks rarely take up the slack, either. They are quick to charge back to merchants, and slow to resolve issues in the merchant’s favor. Enough chargebacks, and they may even lose their ability to accept credit cards all together.

The upshot then is, if someone uses a stolen credit card in a store, it’s pretty much as if they just walked out the door with it.

And so, merchants want to do everything they can to make sure that’s really your card you’re paying with. They decide that requiring ID is a great solution, and convince themselves and others that it’s a good idea, and soon everyone forgets that it’s all to protect the merchants.

But you know what? Tell me the truth, and I’ll help. Post a sign that says “To help protect us from theft, please present photo ID with your credit card.” prominently near the register, and I’ll be a lot happier to comply. I want the stores I shop at to be successful! But lie to me, and tell me you’re protecting me, and I’ll be exercising my right to not show ID all over the place.