As several recent high-profile security breaches have taught consumers, credit and debit cards are never entirely safe from thieves. Fortunately, if your physical card — or account information — is stolen, you aren’t likely to be liable for most fraudulent transactions. However, liability rules can vary by card type and when you report the theft.
Credit or debit?
According to the Federal Trade Commission, if your physical credit card is lost or stolen and you report the loss before it’s used in a fraudulent transaction, your card issuer can’t hold you responsible for unauthorized charges. However, you may be responsible for up to $50 in fraudulent charges if you don’t report the card loss until after a thief has used it.
The rules governing debit cards are a little different. If you report a missing debit card before any unauthorized transactions are made, you aren’t responsible for them. And if you report a card loss within two business days after you learn of the loss, your maximum liability is $50.
However, if you report the missing card after two business days but within 60 calendar days of the date your statement showing an unauthorized transaction was mailed, liability can jump to $500. Worse, if you report the card loss more than 60 calendar days after your statement showing unauthorized transactions was mailed, you could be liable for all of the funds taken from your account.
What if you notice an unauthorized debit card transaction on your statement, but your card is still in your possession? In that case, you have 60 calendar days after the statement showing the unauthorized transaction is mailed to report it and avoid liability.
Lower liability protections on debit cards may make you wonder if you’re safer using a credit card. Keep in mind that some debit card companies offer protections that go above what the law requires. For example, your issuer may waive charges if your account is in good standing and you’ve exercised reasonable care in safeguarding your card.
Finally, if you’re liable for fraudulent charges, check your homeowners insurance policy. Some policies cover liabilities incurred when credit and debit cards are stolen.
Did you know that we have a fraud examination team? Contact us for more information.