The Mystery of the Disappearing Credit Card Signature

Yesterday, at a parking garage, I had to use one hand to sign and hold a credit card receipt. So, I wrote a tiny squiggle. No one cared.

For some smiles, you can see here also that signatures don’t matter:

The Rise and Demise of the Signature

We used to have to sign our credit cards. Then a merchant would (sometimes) compare the receipt with the signed back of the card. The goal was fraud prevention. It did not quite work.

However, before doing away with signatures, we needed a better way for people to identify themselves. Also, merchants needed a nudge. Now because of microchips and thumbprints there is a better way. And merchants were told that they would be liable for fraudulent purchases unless they switched to chips. So they did.

This month the Big Four will take the next step and eliminate signatures…sort of. American Express will do away with signatures everywhere in the world. Meanwhile MasterCard and Discover limited the new policy to the U.S. and Canada but Discover added Mexico and the Caribbean. As for Visa, signatures will be optional in North America but only on cards with chips.

Our Bottom Line: Transaction Costs

Although credit and debit card signatures are meaningless, still their disappearance will make a difference. An economist would say that our transaction costs will decrease.

Defined as the extra things we do to accomplish a task, the transaction cost involves the time, energy, and money we sacrifice. I always like to use my CVS calls as the example. If I have to speak with someone to renew a prescription, I go through the same initial voicemail message. But then hitting the requisite “3” takes me to another voicemail message. I then hit “4,” reach the pharmacy, and am placed on “hold.”

Similarly, the signatures we provide during a purchase take time, they take some effort, and they increase others’ wait-in-line time. One executive even called the signature a “pain point” in the checkout process.

Returning to where we began, we can solve the mystery of the disappearing signature. Like the dinosaur, it cannot survive in a new environment.

My sources and more: The NY Times and the Chicago Tribune had the most up-to-date articles about checkout signatures. But it was also handy to see how the MasterCard announcement started it all.

Please note that my CVS example was published in a past econlife post. Also, the featured photo was from the AP.