Related story and wondering if the OP may have been chasing red herrings. I recently noticed an unauthorized charge for a small amount on my credit card (something about FB/Meta). Likely someone probing the card to see if anyone would notice. I called the CC company, had them removed the charge, canceled the card and had them send me a new card (5-7 business days). With the brand new unused card (new CC number, new expiration date, new CVV), the fraudulent payments resumed (again FB/Meta). How is this possible? The reason: digital wallets. Your credit card number, etc. transfers via digital wallets even when you cancel the card. I again called the credit card company and this time, told them to cancel all the digital wallets (there were 99 of them!). There is no way to do this online. You have to speak to a human in a call center. You then have to sit through a lecture about how all your renewing payments are going to reset and you will have to re-establish them will all merchants. "Yes, I understand that. Please cancel the card and all digital wallets!" Then you have to hold for twenty minutes (why? what are they doing? manually canceling all the digital wallets?). The lesson I learned here is that canceling your credit card may not be what you think. Also recurring payments must be incredibly lucrative and canceling them must amount to a big loss in revenue. (Edited for grammar.)
I’m not sure about “digital wallets”, but the concept of updating credit card details after a new card is issued does exist, and it’s a service offered by credit card companies.
I also noticed that my Google Wallet cards no longer have expiration dates- when a card expires and they issue a new one, the Wallet card works without any intervention on my part
Interesting. I recently cancelled and reordered a card and I have still been able to make purchases via Amazon without ever making an update. In this case I am happy about it because I am lazy but had no idea how it was working. Presume this is what is going on.
Indeed, I suspect that's what went on here. I don't think there even exist 99 providers of what's customary called a digital wallet (e.g. Apple/Google Pay), and there's no definitely no single person that uses 99 of them.
It's bad service from GP's card company though, with network tokens they should be able to see which specific token was abused, and revoke just that one.
Yep. I've been able to use the "wrong" (but still valid) expiration date on my AmEx for a long time. I've had other credit cards where the autopay info was never updated and it just kept working for at least 6 months.
Account Updater functionality isn't necessarily even involved there. In the end whether to accept a transaction is up to the issuer, and quite often they'll keep accepting recurring transactions on otherwise outdated card information.
Digital wallets as in Apple/Google Pay? I had a similar thing happen and I am wondering what did you make of this double charge, what did the attackers do in your opinion?
no it's like a continuation of your credit card for recurring payments.
It's called Automatic Billing Updater (ABU)
the idea is that if you ask for a new credit card after being stolen, your say utility providers or other like netflix subscriptions can seamlessly switch over to the new credit card number.
it worked fine for a while, but of course the problem is that afterwards the stolen credit card credentials started to be refreshed as well.
(used ai to fetch the list below).
Visa: Visa Account Updater (VAU)
Mastercard: Automatic Billing Updater (ABU)
American Express: Cardrefresher
General: Recurring Payment Tokenization
Payment processors don't allow just brute forcing all card numbers a.k.a. card enumeration or card testing [1][2] and card schemes penalise merchants and payment processors heavily if they don't take measures against it [3].
The rate they try becomes very non frequent when they use multiple card validation apis. I'm not sure how it can be related when it's different pan numbers, different source ips etc.
Enumerating CVC2 with a single PAN is a different story.
Settlement the part where the bank agrees to transfer money from your account (in this case increasing your debt on the card) to the merchant is completely separate from Authorization.
Authorization is the modern EMV ("Chip and pin") authentication, the CVV stuff for online, and any other mechanism by which the bank protects themselves from your fraud and, maybe, as an afterthought protects merchants.
The network is completely OK with Amazon saying here's a card number, we say they're paying us $400. That's just a settlement, goes on your bill. No sophisticated cryptography, nothing even as clever as a 4 digit PIN, or remembering your mother's maiden name, just OK, we trust you. Which means you, as a consumer, need to read your credit card bills and dispute anything you don't recognise or you'll pay.
There is very little incentive for the networks to care if you get ripped off. If you don't dispute it then everybody is happy, and if you do they just claw it back from the merchant and it's not their problem.
If 3D secure was mandatory everywhere that would help a lot, but if I understand correctly, it’s not really used in the US and with them being so big, card issuers are largely forced to allow non 3D secure requests or their clients will be unable to use their cards for too many things.
So an enormously good anti-fraud mechanism is severely handicapped.
It’s really frustrating for most of the rest of the world.
I don’t get it, do US citizens prefer being defrauded over what is perceived as a slight inconvenience?
Even for non-victims of fraud, they still pay for the fraud as all merchants up the prices of their goods to cover fraud costs/insurance.
No, the laws are different- and more consumer friendly in the US- so the US consumer behavior is different.
Back when credit cards were first starting out (which happened in the US) the US Congress passed a law- the Fair Credit Billing Act of 1974- that consumers were only liable for $50 of losses as long as they reported the missing credit card within 60 days of the end of the fraudulent billing cycle. This was back when credit cards purchases were all made on paper with the machine that went "kachunk" and transferred a carbon copy of your card- everything was done completely offline. That law has not been changed, in fact, most banks completely waive the $50 and don't hold card-holders liable for anything reported (basically, annoying a customer over $50 isn't worth it to the bank). Thanks to the internet, suddenly cards got a lot easier to steal and a lot easier to exploit- but banks are still on the hook for all losses reported within 60 days of the end of the cycle. The result is that American banks have invested an enormous amount in real-time monitoring of credit card transactions, and are doing lots of stuff to monitor this- they care deeply since ultimately they are on the hook- but the consumer doesn't care. This is why US card's from the consumer perspective are so much laxer, because our banks have invested far more on the back-end because the consumer is held harmless in a way they aren't with European cards.
As a totally separate issue, the EU has regulated the amount of interchange fees that card-companies can charge, but the US has not capped them. The result is that US card-holders can get significant kickbacks for using cards (especially true for the top decile of wealth), in a way that is functionally impossible with EU issued cards that have capped interchange fees. There is a big lawsuit happening now to try and allow merchants to only accept low-fee cards (the standard VISA/MC/AMEX deal requires treating all cards equally, which gives them an incentive to push people to higher interchange cards). We will see what happens with that suit, but until then, American high-spenders can have much higher rewards on their cards, which also encourages greater use of the cards- and making them have less friction than the EU versions.
Why would the law being different mean they wouldn't use 3DS though? Surely it'd cut out a good amount of fraud along with the realtime monitoring? I understand that US consumers don't have a stake in this, but can't all the banks just agree to enforce 3DS? I can't imagine Americans are going to stop using their cards because of a small amount of friction added
They could, but it's one of those things that really only work if everybody joins. Because 3DS is rarely used right now, a portion of merchants don't even support it, so if you start enforcing is as a single bank, your customers will start complaining their card doesn't work. The banking industry in the US is also more decentralized than in the EU, so getting everybody to join in simultaneously is hard.
The window of opportunity for 3DS has also more or less passed, the industry is moving on to the next generation of tech (wallets/tokenization), that should be both easier to use and more secure.
Because adding friction will deter many impulse purchases. Americans use credit cards constantly. The equilibrium would be perturbed in a way very much not advantageous for the credit card issuers if consumers became more cautious about using credit cards.
It’s the same reason credit card issuers are willing to pay Apple a few basis points to participate in Apple Pay: reducing friction has a non-linear impact on propensity to pay.
Exactly, if citizens could convince US lawmakers to make it mandatory, it would be a huge net benefit to society as a whole.
I suspect that banks and merchants would lobby against it due the work involved. After all, they’ve already marked up their services and goods to cover the cost of fraud/insurance. So right now they don’t pay the cost of it, instead all their customers do through higher prices than they would otherwise have needed to pay.
> Exactly, if citizens could convince US lawmakers to make it mandatory, it would be a huge net benefit to society as a whole.
That's not obviously true. Adding security would likely reduce fraud, but would also make transactions more difficult and time consuming, and may also make recovering from fraud more difficult and time consuming.
Legislate that the banks are liable for refunding this class of fraud and you'll find they suddenly take this stuff a lot more seriously and "discover" the technology.
I don't understand your point. The banks and credit card companies are already responsible. If I have a fraudulent charge I call and tell them it's fraudulent and they say okay and take it off and either getit back from the issuer or eat the difference.
They can also punish you for doing so, like banning you from the bank.
They also report account closures to ChexSystems, which can make it harder to open accounts at other banks for years. Credit card issuers can drop you and ding your credit. Definitively not your fault, but still your problem, and the consequences are for you.
Huh? Your conclusion does not follow. A large fraction of the interchange fee is kicked back to customers.
The size of the pie being so much bigger means the issuer’s tolerance for fraud is much larger, but it’s orthogonal to whether there’s actually more fraud. In practice credit cards fraud actually impacting customers is vanishingly rare at this point.
People should have a separate card for online payments and have just enough money on it for a payment.
I know that I am naïve :)
Back to the article: Weak point was a password that lead to another merchant not using 3D secure.
It seems from the article that bad actors have fully automated system, so (big) merchants should have handle automatic login attempts from the same ip address with different accounts. I see it from our wordfence logs that ip rotation is not so quick so it could be handled with some permanent ip blocking.
I agree with the seperate card. That was my seperate card and luckily the amount was not quite big because of that.
>Weak point was a password that lead to another merchant not using 3D secure
Well leaking a password shouldn't cause leaking a whole ass credit card data imo. The same data is printed on physical receipts the markets print, sometimes 4 digits, sometimes 10 digits. It's still possible to brute force from unattended physical receipts on the market.
My previous bank provided this virtual card service on demand. You create the card for a single purchase with a specific amount and that’s it. I moved to an other bank when getting an affordable mortgage loan became impossible in it for me.
I once had a person that was hired by my company and then started bragging about finding a way to add stored value to gift cards. Then come to find out they were under investigation by the FBI. This was a government contractor mind you, so the biggest security guard I’ve ever seen showed up to escort them out.
Virtual credit cards have been a thing for years. I remember bank of america or Citi providing them to me 15+ years ago. If I recall it was a java app or maybe even a standalone exe. Shocked they never took off more broadly.
Robinhood absolutely nails this. Best virtual credit card system I have ever used. So seamless. Can auth a card for one time use, 24 hours, or indefinite until you cancel. Such a great UI / UX
MBNA (which got bought out by Chase) had a Flash-based virtual card app back in the early 2000's. I really enjoyed using it. I also can't understand why they haven't taken off, especially in the world of Everything Is A Subscription we're living in now. I adored being able to set expiration dates and spend limits to save ugly negotiations about ending subscriptions.
I'll get the usual hate for this, but in this instance using bitcoin is safer, since it forces you to verify the transaction on your phone (i.e. you use your phone to pay - either scanning QR code or now NFC).
In the US the Square payment terminals can now accept bitcoin from any lightning enabled wallet app, CashApp does it natively, etc.
>As a consumer, I thought I was safe; when saving my credit card to a billion dollar valued european merchant, or when i purchase something from supermarket and ignore the receipt, but the reality is slightly different from that.
>I got the money back via chargeback in short time.
So as evidenced, you are protected by the fraud infrastructure. The bank ate the loss for the fraud and you were made whole. In the end, the banking system cares about fraud loss. And they are exceptionally good at finding the fraud. Making changes to the card payment system is extremely difficult, due to the vast scale of the systems, so without a very good justification that a particular change will move the needle on fraud rates, the banks will opt to not make the changes.
Banks don’t really eat the loss, instead they ensure all their services have enough of a markup to cover the cost of fraud.
All consumers collectively pay for all the fraud, it’s just that we don’t tend to realize it as it’s not a specific line item on any of our bills, instead we all pay just a little more than we should for everything we buy.
yes, obviously all of the bank's money comes from consumers. what other scenario do you see where a bank(etc) "eats the loss" but the money somehow comes from somewhere else
While it may be obvious to you that your fees include covering all the banks losses to fraud, I think that most people assume the bank makes less profit or something due to such incidents, when the truth is they just raise their prices to maintain profits.
It's my experience that the bank will give up against a motivated chargeback counterparty.
My experience with ebay (stolen credit card) in particular was that things were going well until e-bay sent their stack of paperwork to my bank. Then my chargeback was reversed and shortly after that even my bank account was closed.
So you're not in the clear once you get your chargeback back. That is done initially while they give the other party time to respond. I think it took 30 days or so for ebay to bury me in paperwork, get the chargeback unwound again, and their schpeel was so effective that my bank themselves then accused me of being the fraudster.
As for
> The bank ate the loss for the fraud
I'm not 100% that's true. The entire reason why the chargebackee wants to contest it is because either the chargebackee or the chargebacker is eating the loss. The bank isn't eating that loss. There is no way E-bay would have bothered contesting my chargeback and paying their white collar workers for professional time researching if the bank was just going to eat it.
USA. In USA your chargeback initially is usually taken on face. They'll usually reverse the charge within a week or so. But after that they let the merchant appeal it.
Most merchants won't. But if they do, your bank isn't going to bat for you. If it looks like it's going to take them much time or effort to deal with it they're liable to just throw up their hands and let you duke it out in small claims court.
In my case they had a megacorp ready to fight it on one side, and little old me on the other. So some lady on the phone just insinuated I was a lying scammer and told me my case had been reversed. There was some sort of appeal process I tossed my hat into but it went straight to radio silence and I've not heard from them in years. I would have taken them to court but I moved cross country around the same time and it would cost me $2000 or so for airfare and hotel rooms to show up to the right courts to get $1000 in judgements.
I am a bit confused about your situation. Did you have a stolen card used to make a purchase at ebay that was not under your account? Or did you make a purchase at ebay and have an issue with the product you received?
Scammer created two e-bay accounts. One with my name but e-mail address "pirate" something. A second one, a scammer merchant account to wash the money.
They stole my credit card and used the bogus "me" ebay account to generate invoices (to my real address) and payments for goods from the second scammer merchant account. Then they found tracking numbers to my zip code. They bought the (fake) items from their scammer merchant account using their scammer "me" account. They used those tracking numbers to show the items were shipped and received to someone in my zip code (which is the only publicly available data from the tracking number). Of course, at no point were any of the goods "purchased" by "me" even real, but rather just ways to wash the credit card returns.
When I discovered what happened, I requested ebay refund it. Ebay claimed that since the accounts weren't actually mine (only in my name) I had no right to request a refund. So I could claim they were mine and then be ineligible for a refund because the underlying reason would be vaporized, or not claim them as mine and then be unable to ask for a refund because it's not actually my account -- a catch 22. The tracking numbers, again, since they weren't actually to me, the shipping companies refused to reveal the underlying data to me and I couldn't get any of the evidence showing it wasn't me.
At that point, I had my bank do a chargeback. Which they initially granted. I thought it was a done deal at that point.
Ebay sent all these invoices matching my name, with tracking numbers to my zip code, with my credit card being billed, etc to my bank along with a bunch of pages of banking mumbo jumbo about how the chargeback was wrong. At that point my bank turned face, called me a liar, and reinstated the charges. Not long after this, I noticed e-bay shut down the scammer account but they never refunded me the money. I assume the scammer had sucked out the money faster than e-bay could act to claw it back and when e-bay realized they'd be holding the bag they decided to dump it on the fraud victims.
Recently I got an sms from my bank about a suspicious transaction overseas from my wife’s card, it was literally listed as zero USD, at a time when she was not using her phone or computer.
I initially thought the sms itself was phishing, but after checking online, the sms format matched and the bank webpage ensured the feedback process will not ask for any information so we proceeded to confirm that we did not purchase anything.
The bank immediately cancelled the card and shipped a new one.
My initial thought is that the bank safety system could be overreacting, but it was likely that someone was doing exactly what is described in this article and the bank detected it earlier.
One other thing to add to the story is that the merchants can’t select what level of security they want from the credit card processor. For example, with authorize.net, you can accept the payment with the address doesn’t matter it doesn’t match.
I guess the real question here is how are they able to steal from you? Were they purchasing gift cards from a merchant with lax security?
It’s one thing to guess a number it’s another thing to get the money out of the system
> merchants can’t select what level of security they want from the credit card processor
That really depends on the processor; many processors do allow merchants specify your acceptance rules in quite deep detail.
There's a bit of a dichotomy in the processor market: on one side you have those that aim to make it simple for their customers and unburden them, while on the other side you have those that expose all the complexities and give intricate controls. The first side won't allow you to specify security requirements, while the second side will give you a hundred options (of course there's also processors positioning them in between). The two sides generally target different customers.
> The data they took with the attempt of purchase is the card is still usable (not cancelled)
The payment flows should not distinguish between a nonexistent card, a cancelled card, and a valid card that needs 3D Secure. I bet the banks could even implement that without any cooperation on the part of the merchants.
When my bank account got drained, I could not pay rent or any bills. I had enough cash for about a week of food. It took 4 weeks for the bank to decide I could be made whole. Ever since then I have never even put a debit card in my wallet. I know what the laws say. I have read endless "well banks usually[...]" type messages. and yet all the same I one day awoke to find myself transformed into a giant cockroach.
EFTA Reg E gives banks 10 days to make you whole (less an optional $50 deductible depending on when the fraud was reported). My experience going back decades is that they've simply reverted the charges instantly. What bank were you using? My experience is with the usual suspects --- Citi, Chase, and BofA.
Under the law, credit card issuers actually have more time to deliberate before making you whole, not less.
That's not quite accurate. They have 10 days to issue you a temporary credit if the investigation is going to take more than 10 days. They are willing to issue the credit immediately precisely because it's temporary. If the investigation resolves in your favor the credit becomes permanent and you never know the difference. If it takes more than 30 days - well, I worked with BofA about 15 years ago and saw more than a few customers who ended up with a giant mess because that temporary credit expired after 30 days resulting in a snowball effect of failed payments and NSF charges.
sorry, I ninja edited my comment to avoid having an identical discussion as the previous many times I brought up this topic.
It is nice that you know what the law is but that isn't the same as the law being followed. Also the bank was PNC, not the biggest guy ever but not a small player either.
> You can reverse the charges on debit cards, but the money is withdrawn at the time the charge is made. This is not the case for credit cards.
In a sense it is though, because it lowers your available credit by the amount of the charge. And the fraudsters are going to try to run you right up to your credit limit, so you end up at the same problem: You now have legitimate charges being declined because the fraudsters locked up your payment card.
Most US banks will credit your account for the amount of the dispute immediately upon starting the investigation, so it is functionally equivalent from a consumer perspective.
For most of my adult life I haven't been able to get a credit card --- even after we sold Matasano Security, with the proceeds of that acquisition sitting in a money market checking account at the giant bank I use, that bank would still only issue me a secured card. I pay my bills and all, but at some point when I was like 19 I bought a shirt at Nordstroms and they signed me up for a card and I didn't pay enough attention so I presumably still somehow owe them $40, and it wrecked my credit score.
No part of my life has been harder for not having revolving credit. I had a family, with two kids, starting in my very early 20s; I have lived on ramen wages several times since then; I've bought houses, rented cars, all that stuff. There's really been no point I can think of where I felt like having a revolving credit card would have made any of it more manageable.
I'd get points and stuff (I have a card now, it has a fuckload of points on it) but that's just an incentive to use the cards, not an intrinsic case for them.
I think most people would be much better off just using debit cards, and operating with the funds they actually have. And, again: it is in fact easy for me to say that today, but I believed the same thing when I was younger.
The crazy thing is coming to realize how little your credit score matters if you decide not to play this game. People say it will impact your ability to get a mortgage or a lease, but: not my experience!
I've never needed credit but chose to get credit cards to establish a credit history for the future, and use their cash back programs. I get 3-5% back on all my purchases, so they've paid well over the years, and I have a good credit score.
>> I think most people would be much better off just using debit cards, and operating with the funds they actually have.
Totally agree, but - and this is another example where the rich(er) benefit - if you actually have the money and good financial discipline you're better to put everything on your CC and pay it off in full monthly. Let the merchants finance for free for 3 weeks, plus maybe get perks like purchase protection and extended warranty.
> Under the law, credit card issuers actually have more time to deliberate before making you whole, not less.
Could be but in my personal experience, it has been the exact opposite. That said, I don't use banks. I work with credit unions exclusively. Maybe they have very different rules when it comes to handling debit card fraud.
The only time I have needed a debit card are when a place doesn't accept credit or charges a heavy markup for credit. Someone here mentioned Robinhood virtual credit card - I need to look into it, but I use a similar service and I keep my debit card locked only to unlock it for the exact window I am actually using it.
> rented cars, all that stuff. There's really been no point I can think of where I felt like having a revolving credit card would have made any of it more manageable.
I'm unaware when you last rented a car but when I rented a car last month, the company put a $500 hold on my credit card. That credit card hold went away after I returned the car in good condition a week later. I imagine, if I had used a debit card, that $500 hold would have made $500 disappear from my bank balance during that time. When my nephew rented a car, they put a $2000 hold on his credit card, I'm assuming because he's younger than 21. He certainly doesn't have $2000 to spare in his bank account.
The same credit card got me a free upgrade on the rental car, primary insurance protection during the rental period (I didn't have to buy the $40/day rental insurance) and got me 5% cashback on the full rental amount essentially undoing state taxes. The estimated cash value of these would have been ~$500 for the week. Using the debit card from my credit union would have got me exactly $0 (plus a reduced balance the whole time).
OTOH, a credit union shipped me a chipped debit card preactivated. The debit card shipped via regular USPS mail and was stolen along the way. I always keep $400 in my checking account, so the theif emptied my card at Target and 7/11. Within hours of receiving text about the charges, I called my credit union, informed them of the detail. They sent me a binder full of documents to sign. The whole time the money wasn't refunded. They took a month to review evidence and refunded me $50 (of the $400) and told me I would have to provide additional evidence that needed wet signatures, notarizied to receive the rest ($350). Every notarizied page in my jurisdiction costs $150.
> EFTA Reg E gives banks 10 days to make you whole
Interesting - any idea if this applies to credit unions too (because then you just got $350 back into my pocket!)
> I presumably still somehow owe them $40, and it wrecked my credit score.
> People say it will impact your ability to get a mortgage or a lease, but: not my experience!
Are these mortgages or a leases after you became wealthy or around the time when your credit score was wrecked? I imagine the effects of the Nordstroms credit card wore away 5-7 years (I don't recall exactly which) after the $40 was reported as late. So if more than 7 years passed between these two events, you might have a perfect FICO score now, even though you don't know it. I imagine you can just go to CreditKarma for free and use their free "dispute" charge option to permanently erase that Nordstrom black spot forever. I don't think anyone cares a multimillionaire had a forgotten $40 invoice when they were 19.
Also, for anyone above $1MM in liquid networth, most financial institutions treat the credit history as a signal and not the primary signal. I believe you have been above that by a healthy amount for a while now :)
PS: I am a HUGE fan of yours. I wrote all of the above expecting you absolutely wouldn't have a second to read a word but if you do, Thank You not only for reading (I hope atleast some of it helps you) but for your comments on HN from which I have learned a lot.
I bought my first property in 2000, when I was in my very early 20s, and definitely wasn't wealthy. I bought a house in Ann Arbor in 2004, when I had no savings and was living on an ordinary developers salary; another in Chicago in 2005 (don't do what I did) when were starting Matasano. We sold Matasano in 2012 and my credit score was bad enough then that I was still required to get a secured card despite a relatively enormous sum of money parked in my account.
I think EFTA covers the mechanism of how debit cards work, not the institutions that issue them, but I'm not an expert. I would lean towards keeping an account for the card I use in normal transactions at one of the Big Four banks.
In addition to nominal fraud prevention (and how is any debit card better) there’s nothing better to claw back transaction fees, so what the fuck am I supposed to do?
I'm not saying debit cards are better at fraud prevention and response; I'm saying they're roughly equivalent. The downsides of credit cards are self-evident.
The downsides aren’t really self-evident to me. I’ve been using credit cards for everything I can for 35 years and I can’t think of any downsides. Even the cards I’ve had that had annual fees I chose to pay that fee because the benefits were worth more than the fee to me.
I can think of plenty of times where the upsides of having a credit card were realized though.
So maybe I’m wrong but the belief is that debit card protections are worse than a credit card in the US. I really don’t have the personal time to test this, but I do know that when I dispute on a credit card it is initially removed until proven valid.
Again maybe I’m wrong but I don’t agree they are equivalent. It sure fucking feels that way, the money isn’t threatened from my account.
how is it not also your money when using a credit card? It's in the name, "credit" card. you have to pay it off, no? (i have never ever used a credit card)
You are making a purchase ON credit, and unless you are wildly negligent the merchant who accepts payment for the fraudulent purchase eats the costs. You may have to pay the balance owed while the chargeback works through the system but you will not ultimately pay for it.
Plus - like it or not - our society builds your credit based on your use of a credit card. And if you pay your balance in full every month I'm not sure why anyone would prefer paying up front (debit) vs. free financing.
As I understand it, debit cards do have some fraud protection too, but even if it's the same (I don't think it is), it's a way different power dynamic if you're begging for a bank to give you money back (debit card) vs just disputing your credit card bill.
In practice credit cards just have way better fraud protections.
Credit cards as a while use a security model from...what, the 1970s? Sure, they've patched by adding the 3-digit CVC, but really? A huge industry can't do better than that? Honestly, it's pathetic...
Some have speculated that the entire credit card system is compromised, end to end. I think the real question is why NSA didn't intervene in the early 1990s. Online commerce was just beginning, and the importance of electronic funds transfer was obvious, but the method wasn't set in stone. NSA knew about public key crypto well before the rest of us did. They could have helped set up very secure electronic payments, but chose not to for unknown reasons.
I heard a rumor that NSA suggested changes to DES encryption that strengthened it from differential cryptanalysis attacks that the public cryptologists weren't aware of yet.
That isn't a rumor? It's a pretty well documented fact that the NSA was involved in the design of DES and that the magic numbers that people initially assumed were a back door of some sort turned out to make differential cryptanalysis more difficult than randomly chosen ones would have.
Reminds me of when I wrote a lightweight blockchain from scratch including the Lamport OTS (quantum resistant) signature scheme and then most of the leaders from my crypto community at the time turned against me for no reason.
The signature scheme I implemented was thoroughly tested. Implemented from reading the Lamport and Merkel academic papers and under 1000 lines of code in total so pretty easy to audit... Nobody found an issue with it in 5 years. But the suppression was suspicious. The narrative of "Don't roll your own crypto" is suspicious... Is it really better to use the same library as hundreds of thousands of other projects? Is that really lower risk? Didn't we learn from the Axios hack that popularity doesn't provide security.
Okay but... so what? Authentication is a means, not an end. They seem to be missing that what matters at the end of the day is how much money/time/resources actually get lost, and who's on the hook for it. If that's negligible then isn't that mission accomplished? If we could live in a society where your name was enough and you didn't need a card number at all, and yet theft was still low and you still got your money back, that would be even better, not worse.
Related story and wondering if the OP may have been chasing red herrings. I recently noticed an unauthorized charge for a small amount on my credit card (something about FB/Meta). Likely someone probing the card to see if anyone would notice. I called the CC company, had them removed the charge, canceled the card and had them send me a new card (5-7 business days). With the brand new unused card (new CC number, new expiration date, new CVV), the fraudulent payments resumed (again FB/Meta). How is this possible? The reason: digital wallets. Your credit card number, etc. transfers via digital wallets even when you cancel the card. I again called the credit card company and this time, told them to cancel all the digital wallets (there were 99 of them!). There is no way to do this online. You have to speak to a human in a call center. You then have to sit through a lecture about how all your renewing payments are going to reset and you will have to re-establish them will all merchants. "Yes, I understand that. Please cancel the card and all digital wallets!" Then you have to hold for twenty minutes (why? what are they doing? manually canceling all the digital wallets?). The lesson I learned here is that canceling your credit card may not be what you think. Also recurring payments must be incredibly lucrative and canceling them must amount to a big loss in revenue. (Edited for grammar.)
I’m not sure about “digital wallets”, but the concept of updating credit card details after a new card is issued does exist, and it’s a service offered by credit card companies.
Blog post from Stripe:
https://stripe.com/resources/more/what-is-a-card-account-upd...
I also noticed that my Google Wallet cards no longer have expiration dates- when a card expires and they issue a new one, the Wallet card works without any intervention on my part
There are also "network tokens" that allow you to skip this step and instead remain linked to the new credit card when it changes.
Interesting. I recently cancelled and reordered a card and I have still been able to make purchases via Amazon without ever making an update. In this case I am happy about it because I am lazy but had no idea how it was working. Presume this is what is going on.
Indeed, I suspect that's what went on here. I don't think there even exist 99 providers of what's customary called a digital wallet (e.g. Apple/Google Pay), and there's no definitely no single person that uses 99 of them.
It's bad service from GP's card company though, with network tokens they should be able to see which specific token was abused, and revoke just that one.
Yep. I've been able to use the "wrong" (but still valid) expiration date on my AmEx for a long time. I've had other credit cards where the autopay info was never updated and it just kept working for at least 6 months.
Account Updater functionality isn't necessarily even involved there. In the end whether to accept a transaction is up to the issuer, and quite often they'll keep accepting recurring transactions on otherwise outdated card information.
it's called automatic billing updaters.
like
Visa: Visa Account Updater (VAU) https://developer.visa.com/capabilities/vau Mastercard: Automatic Billing Updater (ABU)
it worked fine for sometime, but the problem is that now the stolen credentials are being refreshed now as well.
Check out privacy.com, you can make your own cards. One per service if you want.
For my case, it was almost certain. As it happened single day, the card i use was a virtual card only used in couple big ecommerce websites etc.
If it was leaked somewhere else, i think they wouldn't bother logging in some unrelated account of mine in an ecommerce website.
Digital wallets as in Apple/Google Pay? I had a similar thing happen and I am wondering what did you make of this double charge, what did the attackers do in your opinion?
no it's like a continuation of your credit card for recurring payments.
It's called Automatic Billing Updater (ABU)
the idea is that if you ask for a new credit card after being stolen, your say utility providers or other like netflix subscriptions can seamlessly switch over to the new credit card number.
it worked fine for a while, but of course the problem is that afterwards the stolen credit card credentials started to be refreshed as well.
(used ai to fetch the list below).
Visa: Visa Account Updater (VAU) Mastercard: Automatic Billing Updater (ABU) American Express: Cardrefresher General: Recurring Payment Tokenization
Payment processors don't allow just brute forcing all card numbers a.k.a. card enumeration or card testing [1][2] and card schemes penalise merchants and payment processors heavily if they don't take measures against it [3].
1) https://stripe.com/newsroom/news/card-testing-surge
2) https://stripe.com/blog/the-ml-flywheel-how-we-continually-i...
3) https://docs.stripe.com/disputes/monitoring-programs#enumera...
The rate they try becomes very non frequent when they use multiple card validation apis. I'm not sure how it can be related when it's different pan numbers, different source ips etc.
Enumerating CVC2 with a single PAN is a different story.
Until 6 years ago Stripe didn't obfuscate card numbers in API logs at all.
This blog doesn't mention the most critical part
Settlement the part where the bank agrees to transfer money from your account (in this case increasing your debt on the card) to the merchant is completely separate from Authorization.
Authorization is the modern EMV ("Chip and pin") authentication, the CVV stuff for online, and any other mechanism by which the bank protects themselves from your fraud and, maybe, as an afterthought protects merchants.
The network is completely OK with Amazon saying here's a card number, we say they're paying us $400. That's just a settlement, goes on your bill. No sophisticated cryptography, nothing even as clever as a 4 digit PIN, or remembering your mother's maiden name, just OK, we trust you. Which means you, as a consumer, need to read your credit card bills and dispute anything you don't recognise or you'll pay.
There is very little incentive for the networks to care if you get ripped off. If you don't dispute it then everybody is happy, and if you do they just claw it back from the merchant and it's not their problem.
If 3D secure was mandatory everywhere that would help a lot, but if I understand correctly, it’s not really used in the US and with them being so big, card issuers are largely forced to allow non 3D secure requests or their clients will be unable to use their cards for too many things.
So an enormously good anti-fraud mechanism is severely handicapped.
It’s really frustrating for most of the rest of the world.
I don’t get it, do US citizens prefer being defrauded over what is perceived as a slight inconvenience?
Even for non-victims of fraud, they still pay for the fraud as all merchants up the prices of their goods to cover fraud costs/insurance.
No, the laws are different- and more consumer friendly in the US- so the US consumer behavior is different.
Back when credit cards were first starting out (which happened in the US) the US Congress passed a law- the Fair Credit Billing Act of 1974- that consumers were only liable for $50 of losses as long as they reported the missing credit card within 60 days of the end of the fraudulent billing cycle. This was back when credit cards purchases were all made on paper with the machine that went "kachunk" and transferred a carbon copy of your card- everything was done completely offline. That law has not been changed, in fact, most banks completely waive the $50 and don't hold card-holders liable for anything reported (basically, annoying a customer over $50 isn't worth it to the bank). Thanks to the internet, suddenly cards got a lot easier to steal and a lot easier to exploit- but banks are still on the hook for all losses reported within 60 days of the end of the cycle. The result is that American banks have invested an enormous amount in real-time monitoring of credit card transactions, and are doing lots of stuff to monitor this- they care deeply since ultimately they are on the hook- but the consumer doesn't care. This is why US card's from the consumer perspective are so much laxer, because our banks have invested far more on the back-end because the consumer is held harmless in a way they aren't with European cards.
As a totally separate issue, the EU has regulated the amount of interchange fees that card-companies can charge, but the US has not capped them. The result is that US card-holders can get significant kickbacks for using cards (especially true for the top decile of wealth), in a way that is functionally impossible with EU issued cards that have capped interchange fees. There is a big lawsuit happening now to try and allow merchants to only accept low-fee cards (the standard VISA/MC/AMEX deal requires treating all cards equally, which gives them an incentive to push people to higher interchange cards). We will see what happens with that suit, but until then, American high-spenders can have much higher rewards on their cards, which also encourages greater use of the cards- and making them have less friction than the EU versions.
Why would the law being different mean they wouldn't use 3DS though? Surely it'd cut out a good amount of fraud along with the realtime monitoring? I understand that US consumers don't have a stake in this, but can't all the banks just agree to enforce 3DS? I can't imagine Americans are going to stop using their cards because of a small amount of friction added
> can't all the banks just agree to enforce 3DS
They could, but it's one of those things that really only work if everybody joins. Because 3DS is rarely used right now, a portion of merchants don't even support it, so if you start enforcing is as a single bank, your customers will start complaining their card doesn't work. The banking industry in the US is also more decentralized than in the EU, so getting everybody to join in simultaneously is hard.
The window of opportunity for 3DS has also more or less passed, the industry is moving on to the next generation of tech (wallets/tokenization), that should be both easier to use and more secure.
Because adding friction will deter many impulse purchases. Americans use credit cards constantly. The equilibrium would be perturbed in a way very much not advantageous for the credit card issuers if consumers became more cautious about using credit cards.
It’s the same reason credit card issuers are willing to pay Apple a few basis points to participate in Apple Pay: reducing friction has a non-linear impact on propensity to pay.
> I don’t get it, do US citizens prefer being defrauded over what is perceived as a slight inconvenience?
Do you think we are requesting to have less secure payment methods or something?
No, we don't "prefer to get defrauded", but things like this are a matter of negotiation between the card issuers and the merchants.
> but things like this are a matter of negotiation between the card issuers and the merchants.
Not necessarily, the EU has mandated strong customer authentication by law (PSD2), and as a result has practically universal 3DSecure support.
Exactly, if citizens could convince US lawmakers to make it mandatory, it would be a huge net benefit to society as a whole.
I suspect that banks and merchants would lobby against it due the work involved. After all, they’ve already marked up their services and goods to cover the cost of fraud/insurance. So right now they don’t pay the cost of it, instead all their customers do through higher prices than they would otherwise have needed to pay.
> Exactly, if citizens could convince US lawmakers to make it mandatory, it would be a huge net benefit to society as a whole.
That's not obviously true. Adding security would likely reduce fraud, but would also make transactions more difficult and time consuming, and may also make recovering from fraud more difficult and time consuming.
The costs may not justify the benefits.
Bold of you to assume that the public has more influence on legislation than lobbyists do in the US.
Ah, the natural call of the wild European: blaming individual Americans for a century of policy failures with truly majestic smugness.
Who should be blamed then? Do you not vote your lawmakers? Do you not vote with your wallet by buying from non-3d-secure merchants?
Legislate that the banks are liable for refunding this class of fraud and you'll find they suddenly take this stuff a lot more seriously and "discover" the technology.
I don't understand your point. The banks and credit card companies are already responsible. If I have a fraudulent charge I call and tell them it's fraudulent and they say okay and take it off and either getit back from the issuer or eat the difference.
They can also punish you for doing so, like banning you from the bank.
They also report account closures to ChexSystems, which can make it harder to open accounts at other banks for years. Credit card issuers can drop you and ding your credit. Definitively not your fault, but still your problem, and the consequences are for you.
Quite hard to do when banks are major bribers of politicians.
FWIW, HSBC USA Mastercard uses 3D secure if it's something you want and you're in the states.
How much is lost to fraud that would be prevented by 3d secure, 0.1%?
In Europe, the max interchange fee is 0.3%. In the US, the average is 2%. So the relative impact of fraud is much higher.
Huh? Your conclusion does not follow. A large fraction of the interchange fee is kicked back to customers.
The size of the pie being so much bigger means the issuer’s tolerance for fraud is much larger, but it’s orthogonal to whether there’s actually more fraud. In practice credit cards fraud actually impacting customers is vanishingly rare at this point.
There is also an additional (usually pretty high) fee for getting chargebacks.
People should have a separate card for online payments and have just enough money on it for a payment.
I know that I am naïve :)
Back to the article: Weak point was a password that lead to another merchant not using 3D secure.
It seems from the article that bad actors have fully automated system, so (big) merchants should have handle automatic login attempts from the same ip address with different accounts. I see it from our wordfence logs that ip rotation is not so quick so it could be handled with some permanent ip blocking.
Tbh, fraud for credit cards is covered by the bank, so I typically just don't care. I just check my statements for anything that looks off.
I agree with the seperate card. That was my seperate card and luckily the amount was not quite big because of that.
>Weak point was a password that lead to another merchant not using 3D secure
Well leaking a password shouldn't cause leaking a whole ass credit card data imo. The same data is printed on physical receipts the markets print, sometimes 4 digits, sometimes 10 digits. It's still possible to brute force from unattended physical receipts on the market.
Mercury now offers personal bank accounts. You can create virtual debit cards just like companies can with Brex/Mercury/Ramp etc.
Not affiliated, but Capital One Eno virtual cards work well for this purpose.
My previous bank provided this virtual card service on demand. You create the card for a single purchase with a specific amount and that’s it. I moved to an other bank when getting an affordable mortgage loan became impossible in it for me.
I think https://privacy.com is the best solution we can have with the current system.
I once had a person that was hired by my company and then started bragging about finding a way to add stored value to gift cards. Then come to find out they were under investigation by the FBI. This was a government contractor mind you, so the biggest security guard I’ve ever seen showed up to escort them out.
What does “add stored value to gift cards” mean?
I'm guessing it means they can fraudulently add money to a store gift card without it costing anything.
I think it means "take a gift card with $10 value stored and make it a gift card with $20 stored".
Virtual credit cards have been a thing for years. I remember bank of america or Citi providing them to me 15+ years ago. If I recall it was a java app or maybe even a standalone exe. Shocked they never took off more broadly.
Robinhood absolutely nails this. Best virtual credit card system I have ever used. So seamless. Can auth a card for one time use, 24 hours, or indefinite until you cancel. Such a great UI / UX
It didn’t take off because it was easier to eat the costs of fraud than to maintain the system. It didn’t catch on simply because it’s pro-consumer.
MBNA (which got bought out by Chase) had a Flash-based virtual card app back in the early 2000's. I really enjoyed using it. I also can't understand why they haven't taken off, especially in the world of Everything Is A Subscription we're living in now. I adored being able to set expiration dates and spend limits to save ugly negotiations about ending subscriptions.
I'll get the usual hate for this, but in this instance using bitcoin is safer, since it forces you to verify the transaction on your phone (i.e. you use your phone to pay - either scanning QR code or now NFC). In the US the Square payment terminals can now accept bitcoin from any lightning enabled wallet app, CashApp does it natively, etc.
>As a consumer, I thought I was safe; when saving my credit card to a billion dollar valued european merchant, or when i purchase something from supermarket and ignore the receipt, but the reality is slightly different from that.
>I got the money back via chargeback in short time.
So as evidenced, you are protected by the fraud infrastructure. The bank ate the loss for the fraud and you were made whole. In the end, the banking system cares about fraud loss. And they are exceptionally good at finding the fraud. Making changes to the card payment system is extremely difficult, due to the vast scale of the systems, so without a very good justification that a particular change will move the needle on fraud rates, the banks will opt to not make the changes.
Banks don’t really eat the loss, instead they ensure all their services have enough of a markup to cover the cost of fraud.
All consumers collectively pay for all the fraud, it’s just that we don’t tend to realize it as it’s not a specific line item on any of our bills, instead we all pay just a little more than we should for everything we buy.
yes, obviously all of the bank's money comes from consumers. what other scenario do you see where a bank(etc) "eats the loss" but the money somehow comes from somewhere else
While it may be obvious to you that your fees include covering all the banks losses to fraud, I think that most people assume the bank makes less profit or something due to such incidents, when the truth is they just raise their prices to maintain profits.
If the rate of fraud reduced bonus payments to executives.
> The bank ate the loss for the fraud and you were made whole
_If_ you notice the fraudulent charge.
It's my experience that the bank will give up against a motivated chargeback counterparty.
My experience with ebay (stolen credit card) in particular was that things were going well until e-bay sent their stack of paperwork to my bank. Then my chargeback was reversed and shortly after that even my bank account was closed.
So you're not in the clear once you get your chargeback back. That is done initially while they give the other party time to respond. I think it took 30 days or so for ebay to bury me in paperwork, get the chargeback unwound again, and their schpeel was so effective that my bank themselves then accused me of being the fraudster.
As for
> The bank ate the loss for the fraud
I'm not 100% that's true. The entire reason why the chargebackee wants to contest it is because either the chargebackee or the chargebacker is eating the loss. The bank isn't eating that loss. There is no way E-bay would have bothered contesting my chargeback and paying their white collar workers for professional time researching if the bank was just going to eat it.
in what country?
USA. In USA your chargeback initially is usually taken on face. They'll usually reverse the charge within a week or so. But after that they let the merchant appeal it.
Most merchants won't. But if they do, your bank isn't going to bat for you. If it looks like it's going to take them much time or effort to deal with it they're liable to just throw up their hands and let you duke it out in small claims court.
In my case they had a megacorp ready to fight it on one side, and little old me on the other. So some lady on the phone just insinuated I was a lying scammer and told me my case had been reversed. There was some sort of appeal process I tossed my hat into but it went straight to radio silence and I've not heard from them in years. I would have taken them to court but I moved cross country around the same time and it would cost me $2000 or so for airfare and hotel rooms to show up to the right courts to get $1000 in judgements.
I am a bit confused about your situation. Did you have a stolen card used to make a purchase at ebay that was not under your account? Or did you make a purchase at ebay and have an issue with the product you received?
Scammer created two e-bay accounts. One with my name but e-mail address "pirate" something. A second one, a scammer merchant account to wash the money.
They stole my credit card and used the bogus "me" ebay account to generate invoices (to my real address) and payments for goods from the second scammer merchant account. Then they found tracking numbers to my zip code. They bought the (fake) items from their scammer merchant account using their scammer "me" account. They used those tracking numbers to show the items were shipped and received to someone in my zip code (which is the only publicly available data from the tracking number). Of course, at no point were any of the goods "purchased" by "me" even real, but rather just ways to wash the credit card returns.
When I discovered what happened, I requested ebay refund it. Ebay claimed that since the accounts weren't actually mine (only in my name) I had no right to request a refund. So I could claim they were mine and then be ineligible for a refund because the underlying reason would be vaporized, or not claim them as mine and then be unable to ask for a refund because it's not actually my account -- a catch 22. The tracking numbers, again, since they weren't actually to me, the shipping companies refused to reveal the underlying data to me and I couldn't get any of the evidence showing it wasn't me.
At that point, I had my bank do a chargeback. Which they initially granted. I thought it was a done deal at that point.
Ebay sent all these invoices matching my name, with tracking numbers to my zip code, with my credit card being billed, etc to my bank along with a bunch of pages of banking mumbo jumbo about how the chargeback was wrong. At that point my bank turned face, called me a liar, and reinstated the charges. Not long after this, I noticed e-bay shut down the scammer account but they never refunded me the money. I assume the scammer had sucked out the money faster than e-bay could act to claw it back and when e-bay realized they'd be holding the bag they decided to dump it on the fraud victims.
Recently I got an sms from my bank about a suspicious transaction overseas from my wife’s card, it was literally listed as zero USD, at a time when she was not using her phone or computer.
I initially thought the sms itself was phishing, but after checking online, the sms format matched and the bank webpage ensured the feedback process will not ask for any information so we proceeded to confirm that we did not purchase anything.
The bank immediately cancelled the card and shipped a new one.
My initial thought is that the bank safety system could be overreacting, but it was likely that someone was doing exactly what is described in this article and the bank detected it earlier.
One other thing to add to the story is that the merchants can’t select what level of security they want from the credit card processor. For example, with authorize.net, you can accept the payment with the address doesn’t matter it doesn’t match.
I guess the real question here is how are they able to steal from you? Were they purchasing gift cards from a merchant with lax security?
It’s one thing to guess a number it’s another thing to get the money out of the system
> merchants can’t select what level of security they want from the credit card processor
That really depends on the processor; many processors do allow merchants specify your acceptance rules in quite deep detail.
There's a bit of a dichotomy in the processor market: on one side you have those that aim to make it simple for their customers and unburden them, while on the other side you have those that expose all the complexities and give intricate controls. The first side won't allow you to specify security requirements, while the second side will give you a hundred options (of course there's also processors positioning them in between). The two sides generally target different customers.
Rate limiting and anomaly detection are the real gatekeepers here. A lot of "fraud prevention" is still reactive.
Another mistake:
> The data they took with the attempt of purchase is the card is still usable (not cancelled)
The payment flows should not distinguish between a nonexistent card, a cancelled card, and a valid card that needs 3D Secure. I bet the banks could even implement that without any cooperation on the part of the merchants.
At least with a credit card you have some fraud protection. Report it and the charge should be reversed. And chargebacks are possible.
With a debit card you’re playing with your own money.
That has not been my experience with debit cards in the US at major banks, at all, over decades.
(I'm pathologically avoidant of credit cards, which I think are mostly pointless.)
When my bank account got drained, I could not pay rent or any bills. I had enough cash for about a week of food. It took 4 weeks for the bank to decide I could be made whole. Ever since then I have never even put a debit card in my wallet. I know what the laws say. I have read endless "well banks usually[...]" type messages. and yet all the same I one day awoke to find myself transformed into a giant cockroach.
EFTA Reg E gives banks 10 days to make you whole (less an optional $50 deductible depending on when the fraud was reported). My experience going back decades is that they've simply reverted the charges instantly. What bank were you using? My experience is with the usual suspects --- Citi, Chase, and BofA.
Under the law, credit card issuers actually have more time to deliberate before making you whole, not less.
That's not quite accurate. They have 10 days to issue you a temporary credit if the investigation is going to take more than 10 days. They are willing to issue the credit immediately precisely because it's temporary. If the investigation resolves in your favor the credit becomes permanent and you never know the difference. If it takes more than 30 days - well, I worked with BofA about 15 years ago and saw more than a few customers who ended up with a giant mess because that temporary credit expired after 30 days resulting in a snowball effect of failed payments and NSF charges.
sorry, I ninja edited my comment to avoid having an identical discussion as the previous many times I brought up this topic.
It is nice that you know what the law is but that isn't the same as the law being followed. Also the bank was PNC, not the biggest guy ever but not a small player either.
You can reverse the charges on debit cards, but the money is withdrawn at the time the charge is made. This is not the case for credit cards.
> You can reverse the charges on debit cards, but the money is withdrawn at the time the charge is made. This is not the case for credit cards.
In a sense it is though, because it lowers your available credit by the amount of the charge. And the fraudsters are going to try to run you right up to your credit limit, so you end up at the same problem: You now have legitimate charges being declined because the fraudsters locked up your payment card.
That's true, but it's not the claim the parent commenter made.
Most US banks will credit your account for the amount of the dispute immediately upon starting the investigation, so it is functionally equivalent from a consumer perspective.
Why do you think they’re pointless?
For most of my adult life I haven't been able to get a credit card --- even after we sold Matasano Security, with the proceeds of that acquisition sitting in a money market checking account at the giant bank I use, that bank would still only issue me a secured card. I pay my bills and all, but at some point when I was like 19 I bought a shirt at Nordstroms and they signed me up for a card and I didn't pay enough attention so I presumably still somehow owe them $40, and it wrecked my credit score.
No part of my life has been harder for not having revolving credit. I had a family, with two kids, starting in my very early 20s; I have lived on ramen wages several times since then; I've bought houses, rented cars, all that stuff. There's really been no point I can think of where I felt like having a revolving credit card would have made any of it more manageable.
I'd get points and stuff (I have a card now, it has a fuckload of points on it) but that's just an incentive to use the cards, not an intrinsic case for them.
I think most people would be much better off just using debit cards, and operating with the funds they actually have. And, again: it is in fact easy for me to say that today, but I believed the same thing when I was younger.
The crazy thing is coming to realize how little your credit score matters if you decide not to play this game. People say it will impact your ability to get a mortgage or a lease, but: not my experience!
I've never needed credit but chose to get credit cards to establish a credit history for the future, and use their cash back programs. I get 3-5% back on all my purchases, so they've paid well over the years, and I have a good credit score.
>> I think most people would be much better off just using debit cards, and operating with the funds they actually have.
Totally agree, but - and this is another example where the rich(er) benefit - if you actually have the money and good financial discipline you're better to put everything on your CC and pay it off in full monthly. Let the merchants finance for free for 3 weeks, plus maybe get perks like purchase protection and extended warranty.
> Under the law, credit card issuers actually have more time to deliberate before making you whole, not less.
Could be but in my personal experience, it has been the exact opposite. That said, I don't use banks. I work with credit unions exclusively. Maybe they have very different rules when it comes to handling debit card fraud.
The only time I have needed a debit card are when a place doesn't accept credit or charges a heavy markup for credit. Someone here mentioned Robinhood virtual credit card - I need to look into it, but I use a similar service and I keep my debit card locked only to unlock it for the exact window I am actually using it.
> rented cars, all that stuff. There's really been no point I can think of where I felt like having a revolving credit card would have made any of it more manageable.
I'm unaware when you last rented a car but when I rented a car last month, the company put a $500 hold on my credit card. That credit card hold went away after I returned the car in good condition a week later. I imagine, if I had used a debit card, that $500 hold would have made $500 disappear from my bank balance during that time. When my nephew rented a car, they put a $2000 hold on his credit card, I'm assuming because he's younger than 21. He certainly doesn't have $2000 to spare in his bank account.
The same credit card got me a free upgrade on the rental car, primary insurance protection during the rental period (I didn't have to buy the $40/day rental insurance) and got me 5% cashback on the full rental amount essentially undoing state taxes. The estimated cash value of these would have been ~$500 for the week. Using the debit card from my credit union would have got me exactly $0 (plus a reduced balance the whole time).
OTOH, a credit union shipped me a chipped debit card preactivated. The debit card shipped via regular USPS mail and was stolen along the way. I always keep $400 in my checking account, so the theif emptied my card at Target and 7/11. Within hours of receiving text about the charges, I called my credit union, informed them of the detail. They sent me a binder full of documents to sign. The whole time the money wasn't refunded. They took a month to review evidence and refunded me $50 (of the $400) and told me I would have to provide additional evidence that needed wet signatures, notarizied to receive the rest ($350). Every notarizied page in my jurisdiction costs $150.
> EFTA Reg E gives banks 10 days to make you whole
Interesting - any idea if this applies to credit unions too (because then you just got $350 back into my pocket!)
> I presumably still somehow owe them $40, and it wrecked my credit score.
> People say it will impact your ability to get a mortgage or a lease, but: not my experience!
Are these mortgages or a leases after you became wealthy or around the time when your credit score was wrecked? I imagine the effects of the Nordstroms credit card wore away 5-7 years (I don't recall exactly which) after the $40 was reported as late. So if more than 7 years passed between these two events, you might have a perfect FICO score now, even though you don't know it. I imagine you can just go to CreditKarma for free and use their free "dispute" charge option to permanently erase that Nordstrom black spot forever. I don't think anyone cares a multimillionaire had a forgotten $40 invoice when they were 19.
Also, for anyone above $1MM in liquid networth, most financial institutions treat the credit history as a signal and not the primary signal. I believe you have been above that by a healthy amount for a while now :)
PS: I am a HUGE fan of yours. I wrote all of the above expecting you absolutely wouldn't have a second to read a word but if you do, Thank You not only for reading (I hope atleast some of it helps you) but for your comments on HN from which I have learned a lot.
I bought my first property in 2000, when I was in my very early 20s, and definitely wasn't wealthy. I bought a house in Ann Arbor in 2004, when I had no savings and was living on an ordinary developers salary; another in Chicago in 2005 (don't do what I did) when were starting Matasano. We sold Matasano in 2012 and my credit score was bad enough then that I was still required to get a secured card despite a relatively enormous sum of money parked in my account.
I think EFTA covers the mechanism of how debit cards work, not the institutions that issue them, but I'm not an expert. I would lean towards keeping an account for the card I use in normal transactions at one of the Big Four banks.
Well good for you. Us poors in the US like them for what they’re worth.
Like what? That banks will make you instantly whole on card fraud to debit cards, and are legally required to do so? I like that too.
In addition to nominal fraud prevention (and how is any debit card better) there’s nothing better to claw back transaction fees, so what the fuck am I supposed to do?
I'm not saying debit cards are better at fraud prevention and response; I'm saying they're roughly equivalent. The downsides of credit cards are self-evident.
The downsides aren’t really self-evident to me. I’ve been using credit cards for everything I can for 35 years and I can’t think of any downsides. Even the cards I’ve had that had annual fees I chose to pay that fee because the benefits were worth more than the fee to me.
I can think of plenty of times where the upsides of having a credit card were realized though.
You don't know anybody in 5-figure+ credit card debt? I know several. I don't know anybody in debit card debt.
So maybe I’m wrong but the belief is that debit card protections are worse than a credit card in the US. I really don’t have the personal time to test this, but I do know that when I dispute on a credit card it is initially removed until proven valid.
Again maybe I’m wrong but I don’t agree they are equivalent. It sure fucking feels that way, the money isn’t threatened from my account.
how is it not also your money when using a credit card? It's in the name, "credit" card. you have to pay it off, no? (i have never ever used a credit card)
You are making a purchase ON credit, and unless you are wildly negligent the merchant who accepts payment for the fraudulent purchase eats the costs. You may have to pay the balance owed while the chargeback works through the system but you will not ultimately pay for it.
Plus - like it or not - our society builds your credit based on your use of a credit card. And if you pay your balance in full every month I'm not sure why anyone would prefer paying up front (debit) vs. free financing.
As I understand it, debit cards do have some fraud protection too, but even if it's the same (I don't think it is), it's a way different power dynamic if you're begging for a bank to give you money back (debit card) vs just disputing your credit card bill.
In practice credit cards just have way better fraud protections.
It comes with fraud protection and your money does not move anywhere until the end of the next month. With a debit card your money moves immediately.
In the US at least, there are still federal protections for debit card fraud: https://uslawexplained.com/debit_card
Credit cards as a while use a security model from...what, the 1970s? Sure, they've patched by adding the 3-digit CVC, but really? A huge industry can't do better than that? Honestly, it's pathetic...
BBVA has dynamic CVC
https://en.wikipedia.org/wiki/3-D_Secure
Some have speculated that the entire credit card system is compromised, end to end. I think the real question is why NSA didn't intervene in the early 1990s. Online commerce was just beginning, and the importance of electronic funds transfer was obvious, but the method wasn't set in stone. NSA knew about public key crypto well before the rest of us did. They could have helped set up very secure electronic payments, but chose not to for unknown reasons.
"The RSA algorithm was publicly described in 1977 by Ron Rivest, Adi Shamir, and Leonard Adleman at MIT"
NSA prefers compromised security so that answers your question
Credit card system was already around for decades before though
I heard a rumor that NSA suggested changes to DES encryption that strengthened it from differential cryptanalysis attacks that the public cryptologists weren't aware of yet.
That isn't a rumor? It's a pretty well documented fact that the NSA was involved in the design of DES and that the magic numbers that people initially assumed were a back door of some sort turned out to make differential cryptanalysis more difficult than randomly chosen ones would have.
Reminds me of when I wrote a lightweight blockchain from scratch including the Lamport OTS (quantum resistant) signature scheme and then most of the leaders from my crypto community at the time turned against me for no reason.
The signature scheme I implemented was thoroughly tested. Implemented from reading the Lamport and Merkel academic papers and under 1000 lines of code in total so pretty easy to audit... Nobody found an issue with it in 5 years. But the suppression was suspicious. The narrative of "Don't roll your own crypto" is suspicious... Is it really better to use the same library as hundreds of thousands of other projects? Is that really lower risk? Didn't we learn from the Axios hack that popularity doesn't provide security.
Why not debit cards too?
Oh okay, so this is why Amex launched the online card in the app that changes the Cvv2 every few minutes.
3-digits? What is this, an OTP for ants?
Amex was late to the party with virtual cards.
None of my banks or credit cards support them... not sure how widespread it really is.
I had no idea amex offers virtual cards... but I looked everywhere in the app and cannot find any such option?
https://www.americanexpress.com/en-gb/services/ways-to-pay/d...
Okay but... so what? Authentication is a means, not an end. They seem to be missing that what matters at the end of the day is how much money/time/resources actually get lost, and who's on the hook for it. If that's negligible then isn't that mission accomplished? If we could live in a society where your name was enough and you didn't need a card number at all, and yet theft was still low and you still got your money back, that would be even better, not worse.