Sounds like Target takes loss prevention as seriously as it does advertising. Impressive.

Curious, but why would Target care too much if the credit card was stolen? My understanding (which could be wrong) was the credit card companies or end users absorb the losses (depending on circumstances).

You would think so but no. Visa etc and the banks don't want that kind of trouble. To charge cards you need a special bank account called a merchant account.

A condition of this merchant account is that if someone issues a charge-back on their creditcard, if the merchant can't prove that the card owner brought the service/product then the funds are taken directly form their merchant account by the bank and then given back to the card-holder.

This is why anti-fraud systems are so important to merchants.

Case: I steal your creditcard, I buy a tv worth $10, 000. You notice this, and chargeback the merchant. The merchant has to pay you $10, 000 and he lost teh cost price of the tv he sold me (say $7, 000).

So by accepting your stolen card as payment, the merchant just lost $17, 000!

Source: I build payment gateways.

Aren't you double-counting here? On net the merchant only loses the merchandise. The net debit to the merchant's account is zero.

correct maths are: merchant gets 10000 then returns 10000 and still has to pay 7000 to vendor for the goods. net loss is 7K, not 17K

You could also say the total loss is 10K to the merchant, assuming he has a reasonable expectation of making that 3K profit...that is getting a little abstract about it though.

Oh yes you are correct.

In this case the merchant only loses the cost to the vendor ($7,000). Good catch.

Typically there's also a fee imposed by the bank for having a chargeback.

Standard is $25, but if you are a big merchant it could be lower.

I think they're counting the loss of the merchandise. So a chargeback for a $10,000 TV would be like losing $10,000 plus whatever the cost of the TV was for the store.

But it's not. Getting paid $10k and giving it back is net zero.

Not when you could have sold the TV for $10K. This is the shoplifting issue; the shop loses both the product and the potential profit on the product.

It gets a bit existential e.g. can you lose what you never really had? But even if you fall on the NO side of that, the cost of re-obtaining a product is not zero.

The cost of re-obtaining the product is $7k, which were already accounted for. Marginal administrative costs are negligible.

But the merchant is still down a TV. Those things aren't free.

Sure. I objected to the assertion that the merchant lost $17k, which is a gross exaggeration.

Like everyone else said, it's not exactly that. It's like getting paid $10k in exchange for a TV, then giving it back but not getting the TV back in return.

$17,000 figure is correct:

1) Store buys TV (COGS = $7K): -$7K

2) Sold TV for $10K. Realized P/L: $3K

3) $10K refunded (chargeback): -$7K

4) TV is gone as well. Inventory: -$7K

5) Potential profit loss: -$3K

Total loss: (7+7+3) = $17K

1. Store buys TV. -$7000

2. Store sells TV. +$10000, subtotal: +$3000

3. Store pays chargeback. -$10000' subtotal: -$7000

You can't double count the TV, and IMO, you can't count the potential profit loss either, as that's covered once the store buys a replacement TV for inventory. There are fees on top of the above, but the store is out the COGS and fees, not double the COGS, plus the margin.

The liability for the card holder is limited by law to something like $50. Whether the credit card company eats the loss or wether the merchant gives them the money back depends I believe on how much information the merchant collected about the transaction. My impression is that usually the merchant eats the loss.

it is almost always the merchant that 'eats' the loss.

edit: the credit card companies and merchant banks have the ability to 'reach back' for a number of months.

Target enjoys solving crimes. They have their own forensic lab in Minnesota.

As former manager of a hypermarket with 170 people team, I need to remind that shop is filming cash registers for many reasons. E.g. to resolve disputes about counting mistakes at the checkout, theft by cashiers, theft by customers.

The merchant is 100% responsible for these losses, which is why they care so much.

It's the merchant's duty to ensure that the person who is charging the purchase owns the credit card, which is why they'll often ask for ID along with the CC.

A stolen CC is useless if no merchant accepts it.

Target also keeps Segway-ish ATVs at their stores for chasing down shoplifters. They supposedly have a top speed around 60mph.

What about other classmates who didn't tell what they saw? I think they're not quite guilt-free as well, in case they really saw of course.

I didn't quite get for what her mom was arrested ("warrant out for her arrest").

Btw, was your wife able to receive the stolen amount? (And maybe something on top of it, for compensation....)

This all happened around her lunch break - so it is very possible that no one was in the room to see it, or the few people remaining didn't notice it. This girl who stole the card was the one sitting right next to her - so it was pretty easy to lean down unnoticed.

Honestly - I don't know what her moms charges were - all I know is that the detective on the case mentioned that when he followed up with us post the girls arrest.

Luckily there were no successful charges made - the first three attempts were all for PS3s at GameStop, Target and BestBuy - then it seems she went to the grocery store and attempted to buy a small purchase of gum and soda (according to the police, this is to test if the card is working). We did get a payment of the stolen cash which we valued at $10 (it probably was closer to $8, but we weren't certain and we were told to round it to $10 then). No additional compensation though on top of that.

Hm, interesting. The place where I live, one is required to enter a PIN code when you buy something in the physical shop. Shops have terminals for that.

Unfortunately the personal security measures on credit cards are very poor in America - I remember even little things like having a persons picture on bank cards in Belgium was a huge step up compared to the cards here. Even online banking here is pretty bad - so many banks still only allow 4 digit pins (often with "safety measures" in place to restrict your options, like reusing numbers, or disallowing years - thus making the available pin pool significantly smaller), and for online banking the security options are often a joke too, such as low maximum character lengths, not allowing anything but a restricted set of characters and simply converting your password to lowercase.

I don't know if this is to keep things "convenient" to the consumer, but I never feel secure in the way my money is handled.

Are you in Europe (like me)? Chip and Pin credit cards are common here. But they are not common in USA. It causes no end of problems for American tourists who come here, since their cards don't work in many shops.

Yup, in Georgia.

Where do you live? I keep hearing comments saying we are "required" to enter a pin in the UK, but we're not. If the chip fails you can swipe and sign.

Georgia, eastern Europe. Never had a chance to experience a failing of a chip though.

"In the end the class mate was trying to buy Playstation 3s to be able to sell, so she could pay off the fines that she received for committing identity theft when she was a minor"

Sounds like jail time was going to put her back on the right track in life. I wonder how she wound up after jail?

Not sure - we received notice of her pending release and that was about it. As for her past - yeah, it was astonishing that she was going to commit the same types of crimes to pay off the fines from her past - it was perfect though that she had that in her written confession with the detective, normally her case from when she was underage would have been sealed, but since she brought it up, it was now knowledge that the court could use.