A Boing Boing exclusive: Adam Penenberg has written and interesting story about a guy who came up with a way to prevent credit card fraud on his online business and ended up losing a lot of money.
In a sense, Comras was able to code a program to instantly pre-authorize transactions before the bank authorized them. And all it cost him was 35 cents a transaction – the same the bank charged to authorize them. For 70 cents a sale, plus the usual 3 percent credit card charge all merchants pay, Comras thought he was protected.
It worked well — for a while. Then earlier this year, Bank One customers started calling, asking why they were being charged a $1 transaction fee. Someone was running stolen credit cards through his system at the rate of about one a minute. It was very methodical. Maybe automated, maybe not. The perpetrator ran about 30,000 of them through the site in one month. And for each one, Comras was charged 35 cents. That wiped out every penny of profit he earned that month.
