I just wanted to add a few points to this discussion.
If you have a credit card, and it becomes lost or stolen and someone charges a bunch things to it, then the bank takes the loss.
If you have a credit card, and there is an unauthorized charge on your statement, then the merchant takes the loss. This would be like: you canceled a magazine subscription but they are still charging you. Or you dispute a service or product with a particular merchant and they won't give you your money back.
You have 60 days from your billing statement to report any suspicious transactions. This is the law entitled Regulation E. Also known as Error Resolution.
Banks are insured for lost or stolen credit cards and will take the loss because it better serves the community. Also, banks want to support the merchants by continuing to accept their customer's credit cards. For example: Lets say a bank always made the merchant take the loss for a lost or stolen card - that merchant may decide not to accept a particular bank's credit card. That would be like Walmart saying, "We will not allow Bank of America credit cards because of all the fraud associated, and the bank reverses our charges." That would upset a lot of Bank of America customer's who shop at Walmart and may switch to a bank that Walmart accepts. So, that's why banks take the loss.
Also, banks are insured and do pay a monthly premium for loss protection. How this works is this: Depending on the bank they choose their deductible. Lets say a bank's deductible is $50,000. The bank has to take losses up to $50,000 before their insurance company will pay the losses over that amount. Thus, a bank will only lose $50,000 during a period of a year, then the insurance company will pick up the rest.
If a bank has losses way out of control, then the insurance company will raise premiums, therefore, that difference is passed to the consumer in the form of higher rates, fees, etc.
