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!
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.
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.
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.
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.
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.
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.
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.
