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Sunday, June 26, 2005

Breach affects 40M Visa MasterCard credit cards - June. 20, 2005

As was pointed out by Budgeting Babe's blog
Breach affects 40M credit cards - Jun. 20, 2005

Along with this being terrible breach of security, it's also going to drive up costs. This is because the administration costs for the credit card companies is going to rise. Everytime there is a theft, they have to notify all of their customers and then get tons of man power to fix the problem.

The scope of this breach is huge. Hypothetically, if the hacker was able to use some of this credit card info to charge credit cards, this money would have to be absorbed by the credit card companies and then the cost is transferred back to customer.

Usually the credit card companies charge much higher interest rates to offset the higher risk attributed to the credit cards being unsecured. This is based on the behaviour of the the customers. Now, with this new theft of credit card info, the credit card companies are taking on even more risk, and probably feel even more justified to charge higher interest rates to pay for the problem.

CNN- "The breach reported by MasterCard on Friday is one in a long line of breaches reported this year by consumer data aggregators like ChoicePoint, retailers such as DSW and corporations such as Time Warner (up $0.35 to $17.13, Research), parent company of CNN/

Rather than a rash of illicit activity, experts say, the slew of reports may have more to do with companies wishing to protect themselves in the wake of a California state law requiring businesses to notify its customers when their personal information has been exposed in a security breach. "


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