Call it the “graying” of America, and it has nothing to do with baby boomers.
Instead, it’s the $14 billion credit card holders are losing each year to “gray,” or deceptive, credit- or debit-card charges, according to a new study by industry consultant Aite Group.
That amounts to $215 a year per cardholder on charges like a canceled gym membership or unsubscribed magazine.
“Companies exercising their gray rights (however wrong they may seem to the rest of us) are well-known entities that many of us do business with every day. They know levying charges is legal, but unethical,” says fraud expert Robert Siciliano.
And gray charges, the report says, are also a problem for the card companies, which actually are losing money on them.
Why? Because “issuers incur service-related expenses when cardholders question and dispute charges,” the report says.
“I would estimate that it is costing the card companies some $360 million more a year in costs than the additional revenue that comes through their network,” said Aite Group analyst Ron Shevlin, the author of the report.
“Banks don’t want gray charges. They lead to unhappy customers who cancel their cards,” says Nessa Feddis, a senior vice president for consumer protection and payments for the American Bankers Association.
Discover Card, listed in the report as having the largest percentage of gray transactions, disputed the numbers. It is fighting gray charges, a spokeswoman said.
“Discover does not assess gray charges. These charges are imposed by the merchant from which the cardholder purchased a product or a service,” says Katie Henry, a Discover spokeswoman. She added that Discover is monitoring merchants that have high dispute rates.
Some card issuers, Shevlin says, are considering providing apps that would identify a gray charge. But until that happens, vigilance is the best strategy in avoiding or reversing such charges.
“Consumers should look at their card bills carefully each month,” Shevlin adds. “They should read disclosure agreements carefully. It is amazing how many consumers don’t take common-sense steps.”