Who do think pays for the goods bought with that stolen card? You think the CEO of MasterCard digs into his pocket and covers the loss? That loss is paid for by the percentage MC takes off the top when they send your money to the store. And that percentage is passed back to you in the form of higher prices. At the end of the day, you're paying for it, but in an insurance-like method rather than eating the whole lump when it happens to you. Cut into credit card fraud, and the price you pay for goods goes down (well, maybe just not up as much).
It's not that easy, Ron.
What is actually happening here is a lot more insidious than it appears. CC systems, very similarly to credit reporting agencies, run a broken system. Anyone can use your CC, or open a new account with your SSN, without any real authentication (like a PIN, for example).
You're right that the CC companies would raise their fees up to a point if more fraud were to occur, which might or might not happen if they didn't inconvenience their customers by canceling their cards for suspicious activity or making them show ID. Let's assume that fraud would increase if they didn't ask for ID.
Now, they would have to raise their fees to stay profitable. They can do that up to a point where another CC solutions provider will have enough of an incentive to provide a new, technically superior, solution that protects against fraud without inconveniencing customers and without having to recoup those costs through high fees.
At that point, consumers will switch to that provider and the established providers will lose a lot of business. Obviously, they don't want that.
What's going on here is quite interesting - companies are selling broken systems and, instead of fixing them, they're limiting the utility the users can get out of the system through those ID checks and card cancellations.
If they didn't do that, they'd find themselves out-priced rather quickly, and their business models would crumble. The CC market is very competitive - prices for consumers won't rise by much, and certainly not for a sustained amount of time, no matter what happens. But companies can and will go away.
So no - protecting me from fraud or rising prices has _nothing_ to do with ID checks. I'm already protected from fraud by federal law and from ricing prices by a very competitive market.
-Felix
