Is your information secure? Checking your credit report will help verify whether everything is going smoothly or if someone is using your credit to make purchases. Credit card fraud is a serious issue that affected over 400,000 Americans in 2020, according to the Federal Trade Commission’s (FTC) Annual Data Book of 2020. Someone has to pay for fraud, but who? Read on to learn about the different scenarios that will give you a better understanding of who is financially responsible for credit card fraud.
Credit card liability explained
Credit card liability in instances of fraud can happen in several ways. Some hackers use phishing emails to steal people’s information while posing as reputable brands. Cybercriminals can also obtain credit card details by hacking into businesses that hold onto your information. Data breaches have become a significant concern in recent years, exposing login credentials, home addresses, financial account numbers and other sensitive information.
When merchants pay for credit card fraud
The bank will cover more credit card fraud issues, but sometimes the merchant is responsible. Small-business owners using outdated swipe payment terminals may have to make up the difference. Merchants are also responsible for credit card fraud repayment if the hacker makes an online purchase.
When cardholders pay for credit card fraud
Cardholders are almost never responsible for credit card fraud. Even under these rare circ*mstances, the Fair Credit Billing Act limits your liability to $50 if someone goes on a spending spree with your card. Some banks have zero liability policies that waive the $50 fee, protecting you from fraudulent behavior in the process. You must report suspicious credit card activity within 60 days of it appearing on your billing statement to avoid paying for the fraudulent activity.
What about cases of debit card fraud?
Debit cards do not have as many built-in protections as credit cards. Immediately reporting debit card fraud can help you avoid costs, but it’s not a guarantee. Your bank account won’t get replenished right away, if at all. Freezing your debit card can limit the damage as you wait to see what will happen to your stolen funds.
What to do if credit card fraud happens to you
It’s essential to act quickly if you detect suspicious credit card activity. Debt can accumulate, and you only have 60 days to report fraudulent spending to your bank. You should review your finances to minimize the likelihood of becoming a victim of credit card fraud.
Notify your credit card company
Create a list of suspicious credit card transactions and notify your credit card company about the activity. Your credit card company can help reduce the damage and cover you for fraudulent activities.
Remove unauthorized charges
Consumers can request their credit card providers to remove unauthorized charges. This step prevents fraudulent activity from hurting your payment history, a critical component of your credit score.
Close the account
If a hacker has your credit card details, they won’t stop spending unless you hit the brakes. Closing your credit card account prevents them from accumulating debt under your name. Closing an account will hurt your credit length, but it’s worth the short-term credit downside to keep your finances safe.
Double-check your other accounts
Some hackers don’t stop with your credit card. Some hackers take out loans and lines of credit using your personal information. You should check your credit report if someone steals your credit card information as it will provide a snapshot of your financial activity. If you see anything suspicious on another credit account, you should take additional action. Placing a fraud alert on your credit or freezing it temporarily can keep your credit safe.
Open a new account
You can open a new account after closing your old credit card. You will still be responsible for any credit card debt outside of any suspicious activity. You can use the new credit card for purchases and continue building your credit score.
Don’t delay
It’s important to act as quickly as possible during credit card fraud. You must notify the bank about suspicious activity within 60 days to qualify for financial protection. Dealing with the issue now will minimize the damage, and you may discover hackers have obtained additional information after reviewing your credit report.
Protect Your Credit
Credit card fraud is a serious issue. Keeping yourself safe with preventative measures and checking your credit report will reduce the likelihood of large-scale financial damage. Consumers who detect suspicious credit card activity should immediately reach out to their bank.
FAQ
Who pays for stolen credit card purchases?
The bank usually pays for stolen credit card purchases. Sometimes, the merchant is responsible. The consumer almost never pays for stolen credit card purchases.
Are you responsible for unauthorized credit card charges?
You are almost never responsible for unauthorized credit card charges. Make sure you notify the bank about these charges within 60 days of them showing up in your billing statement.
How do credit card companies investigate fraud?
Credit card companies assess the transactions and gather information after receiving a report. They then reach a conclusion about who is responsible.
Marc Guberti Marc Guberti is a USA Today and Wall Street Journal bestselling author with over 100,000 students in over 180 countries enrolled in his online courses. He hosts the Breakthrough Success Podcast where he teaches listeners how to grow their businesses and achieve personal transformations. He frequently writes about personal finance and covers investing on his YouTube channel.
