Credit card games

by on June 22, 2007 at 9:45 pm in Economics | Permalink

I usually forget to sign the back of my credit cards.  Or, with one of my cards — the one I use most frequently — the signature rubs off quickly.  Every now and then the card will be rejected because it doesn’t have my signature on it.  Or they will require ID.

I then offer to sign the card, but they never accept this possibility.  Hrrmph.

Could not a thief have signed a previously unsigned card before using it?  In fact I would expect precisely that behavior from a thief.  Wouldn’t a thief take more care to sign than would a lazy, careless card holder?  Upon seeing the unsigned credit card, their estimate of my honesty should go up not down (well, that’s not quite a stable equilibrium…).

I have wondered why it ever makes sense for cards to be signed.  If you sign a card and it is stolen, can they not forge your signature more rather than less easily?  (Imagine signing into one of those signature-reading machines.)  And if merchants were more rational, maybe the signature would carry no positive value in the first place.

djg June 22, 2007 at 9:58 pm

I was always under the impression that the signature is there to make the card a legal instrument rather than to deter theft.

Brian June 22, 2007 at 10:52 pm

As for those signature-reading machines, I’m not sure what their exact purpose is. For the last year or so I have never signed my “real” name on them… I’ve signed “PLEASE HELP ME”, “THIS HAS BEEN STOLEN”, “JIMI HENDRIX”, and as many other creative things as I can come up with, and of course nothing has ever happened. So why do they make users sign them at all? I suppose it only matters in the event that a dispute arises.

Foobarista June 23, 2007 at 12:33 am

One other thing: can anyone actually write a signature in the tiny space provided? My usual signature is at least 4 or 5x bigger than the silly little strip.

SheetWise June 23, 2007 at 1:14 am

This is one of many theatrics we endure when dealing with security. The people implementing these policies are, at best, good at taking instructions. When that works — less frequent than we would hope — they are left to make a decision. Heaven help us all.

You are a victim of “Security Theater” — or, as Homeland Security would refer to to it, “Security Theatre”.

whit stevens June 23, 2007 at 1:55 am

I see where you’re coming from re: the signature. Generally speaking however, I’m appreciative of the very few cashiers that actually bother to request identification, verify my signature, etc. As somebody that a) possesses several credit cards, and b) does not commit credit card fraud, I presumably stand to benefit from these small actions.

T.W June 23, 2007 at 2:33 am

When I worked retail I always compared signatures and got thanked for one of those ask for ID cases by the card holder. For us them signing the recite made return fraud easier to control.

dearieme June 23, 2007 at 5:44 am

“I don’t understand why we have to sign credit card receipts”: Good Lord, are you fellows still doing it that way?

David Culbertson June 23, 2007 at 8:23 am

On the back of my credit card, I wrote “Ask for ID.” I am only asked for ID about a 1/3 of the times I use it.

Tangurena June 23, 2007 at 9:24 am

The rules from Visa state that merchants *may not* ask for ID. The signature panel on the back is the signature agreeing to the terms of the issuers contract.

From the Card acceptance guidelines (PDF), page 29:

An unsigned card is considered invalid and should not be accepted. If a customer gives you an unsigned card, the following steps must be taken:
†¢ Check the cardholder’s ID. Ask the cardholder for some form of official government identification, such as a driver’s license or passport. Where permissible by law, the ID serial number and expiration date should be
written on the sales receipt before you complete the transaction.
†¢ Ask the customer to sign the card. The card should be signed within your full view, and the signature checked against the customer’s signature on the ID. A refusal to sign means the card is still invalid and cannot be accepted. Ask the customer for another signed Visa card.
†¢ Compare the signature on the card to the signature on the ID. If the cardholder refuses to sign the card, and you accept it, you may end up with financial liability for the transaction should the cardholder later dispute the
charge.

“See ID† Some customers write “See ID† or “Ask for ID† in the signature panel, thinking that this is a deterrent against fraud or forgery; that is, if their signature is not on the card, a fraudster will not be able to forge it. In reality, criminals don’t take the time to practice signatures: they use cards as quickly as possible after a theft and prior to the accounts being blocked. They are actually counting on you not to look at the back of the card and compare signatures—they may even have access to counterfeit identification with a signature in their own handwriting.
“See ID† or “Ask for ID† is not a valid substitute for a signature. The customer must sign the card in your presence, as stated above.

Traditionally, asking for ID was one form of discrimination used to make life miserable for minorities, usually rationalised as “how could this negro have a credit card, they must have stolen it”

I am pretty certain that there have been a number of lawsuits/attempted collections where the defendant successfully claimed that they didn’t agree to anything.

Dearime and Tadhgin, in the US, very few places take “chip and pin.” Since phone connectivity was cheap and readily available, our merchant system chose the route of online verification/authorization. Not all of Europe’s phone companies had been privatized by the time the corresponding decision to turn to on-card authorization was made for the European markets.

Thomas June 23, 2007 at 10:21 am

Walmart now asks me for my zip code when I use my AMEX, which is an interesting, if minimal, check on my identity. Is it less likely for some kinds of thieves to know that bit of information?

One of the two Costco’s I shop at–the inner city location–makes a point of checking my ID when I use my AMEX. This despite the fact that I use a membership card at the same time.

At the same time, I can use the same card without signature at most fast food restaurants.

dick king June 23, 2007 at 11:02 am

The credit card company imposes a penalty on the merchant in case of a dispute, but a dispute over whether the card was actually proffered by the account holder at the time of the purchase arises so seldom that so many millions of signatures would have to be checked carefully to avoid not getting paid on one purchase that the merchants rationally decide to violate the rules.

This is not to be confused with chargebacks for other reasons, when say the quality of the goods is at issue, not whether the purchase was legitimate at the time it was made.

-dk

jonjon June 23, 2007 at 1:25 pm

Anyone who has ever worked as a cashier knows that exactly half your customers will freak out if you ask them for ID (me a crook?), and half will blow their tops if you don’t (you’re not protecting me).

MM June 23, 2007 at 2:21 pm

The other reason for asking for a signature on the charge slip (not the card itself), is so the merchant gets a better rate from the company that processes their electronic transactions.

This processor has multiple rates based on all sorts of criteria, but there are two major categories which are “Card Present” and “Card Not Present”. Swiping a card shows that the card was physically in the store at the time of the sale and, if the majority of cards are swiped, the merchant qualifies for the the lower rate. The reason being that in case of a dispute the credit card company can say “This card was swiped through a terminal at XXXX address at 12:15 PM on May 4th”.

If the customer continues to dispute the charge, then the merchant can present the signed sales slip as evidence to avoid the chargeback.

If card numbers are punched in manually or entered through an ecommerce site, these steps are missing, and it is much easier for the customer to successfully dispute the charge. To make up for this, the merchant is charged a higher rate to offset the expected disputes.

The reason that a fast food place doesn’t make you sign your slip is because the effort to find a signed slip for a $5-$10 transaction costs more than just eating the chargeback.

Lekios June 23, 2007 at 6:21 pm

…the gazillions of valid internet & telephone credit-card purchases testify strongly that NO signatures of any kind are NECESSARY to successfully use that convenient method of market exchange on a routine basis.

Vincent Clement June 24, 2007 at 2:51 am

I’m with Lekios and Tyler on this one. The signature, both on the card and on the receipt, is useless. PINs are the way to go.

mickslam June 24, 2007 at 9:22 am

a pretty good way is to sign “Check ID”, similar to what happyjuggler does. About 1 in 6 or 7 seem to actually check another ID of mine. Its better than 0 in 6 or 7.

james stevenson June 24, 2007 at 11:31 am

A couple of posters asked about “chip and pin” security (users enter a PIN after the card is swiped). Sadly, this isn’t used in the US for anything but debit card transactions, whereas in the UK this method is used for credit card transactions as well. There are substantial security benefits to using chip and pin. In the IT security world, there are typically three domains for successfully identifying someone: “who you are,” “what you have,” and “what you know.” An average US credit card transaction verifies only one of these: “what you have,” which is obviously the card itself. Asking for and ID–or better yet–putting the card holder’s photo on the card takes care of “who you are.” Finally, using a PIN code would take care of the “what you know” question. I wonder how much doing these 2 simple things would cut down on US credit card fraud? That said, chip and pin isn’t a magic bullet: Chip & PIN relay attacks The war on credit card fraud is one of constant escalation by parties on both sides.

Xellos June 25, 2007 at 2:59 pm

I don’t see the point of writing “check ID” on the back. These days, many places don’t even ever physically handle the card. All the grocery stores around here, as well as stores like Target, have the scanners mounted on the counters so that the customers swipe the card.

CBH June 27, 2007 at 5:04 pm

Take a peek from the thief’s perspective – if they are forced to sign the card, the street value of the card just went down, because anyone they try to sell the card to for cash won’t have a matching signature (yes, there is a black market for stolen credit cards – mostly card stolen from the mail, because the victim doesn’t know it’s been stolen for quite some time.

If you put “See ID” on the back, you should ALSO put your signature. Use a fine tip Sharpie – they last longer before wearing off. ALWAYS say “thank you for checking the signature” (or) “thank you for asking for ID” to the clerk, waiter, etc… Some businesses take this very seriously, with employees fired on the spot at some locations if their management catch them not checking (or if the customer informs management). IF YOU CLAIM FRAUDULENT CHARGES to your credit card company and the slip has no signature, the merchant is stuck paying for it. If the signature is DIFFERENT from yours, the CARD COMPANY is stuck paying for it. If a stolen card is recovered by the police after being used fraudulently, YOU will probably be stuck paying for the stolen charges. If it was originally resolved with the bank paying, and then your old card floats up a year or two later with no signature on it, you are likely to receive a bill (enforced with threats to your credit report).

Regardless of what you think of the practice, JUST SIGN YOUR CARD. It does prevent some theft and covers your but. Putting “See ID” in addition to a signature is a pretty good idea. Although it just seems to kill some folks, it really is a polite and helpful thing to actually communicate with the person accepting the card, giving thanks or critique as occasion dictates.

Most of the places that don’t require a signature (fast-food etc…) have a limit, such as “no signature required on purchases totaling less than $25 dollars. Merchants who have stolen charges being made frequently can have their merchant accounts (their credit card machine) revoked, or end up with really high rates (like 10% instead of 4%).

A much more interesting discussion would be how much Credit Card companies indirectly PROFIT from fraud and theft committed with their cards or perpetrated on their cardholders by thieves- THAT could make some decent news stories. When you buy something with a card, the bank accrues interest on those charges (through debt investments like CDs and bonds) and on the 3% or so they charge the merchant until disputes are resolved. When the charges are finally resolved, those amounts are written off. Plus, a fairly large amount of theft is never actually reported by cardholders, either because they don’t notice the other charges on their statement, or because, for whatever reason, they are unwilling to file a report with their local police department. When somebody steals your card number online, or if someone steals your wallet, the card companies come out ahead.

Does that make you think twice about identity theft and whether your personal security is really being guarded by your bank?

Rachel September 28, 2010 at 10:20 am

I guess you are right about this. What is the purpose of the signature anyway? We have all this security technology and thieves can still use their bright minds and get our money:)) Isn’t that a paradox? credit card merchant account

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