If a tampered vending machine takes my cash, it's my word against theirs that it's my money they stole.
And woohoo, you're out $1. If your identity is stolen, if your card information is relayed and used, that's a hell of a lot more money available. My five-dollar bill is great because... it can't be used for anything other than five dollars. There's no way for that five dollars to be used to get at more of my money.
Writing the mag strip to a new card won't work for long anyway, since every time I put my card in an ATM machine, the mag strip is re-written
And yet card skimmers are currently quite profitable. The local Costco just found a bunch of them combined with pinhole cameras on their gas POS kiosks. Why would people go through all that effort if there was no financial payday?
If they use my credit card details, I get the money back. The insurance for that is paid by the merchant fees. There is no cash insurance.
All of that drives up fees -- that insurance is passed onto you. No one else is eating it, you're paying the cost through higher prices.