Last year, I became a victim of credit card fraud. I found out about it when my credit card issuer, Chase, sent me a text asking whether I had spent $2,600 at Saks Fifth Avenue in New York.
I sat in my kitchen near San Francisco, confused. I was about to call my wife and ask if she had bought something there online. But just as I reached for the phone, Chase called me. The customer service representative told me that the card had been used a second time, at another high-end store in New York. This time the charge was even larger.
Panic set in. I told the service representative that I hadn’t made the purchases.
So, what was the response? If you think I’m about to tell a cautionary story of financial ruin by way of fraud, you’d be mistaken.
Here’s what really happened: The representative thanked me for my time. She told me the transactions had been removed from my statement, my account had been frozen, and I’d get a new card in the mail in a couple of days. In about three minutes, the mess was resolved.
The reason I tell this terribly anticlimactic story is to illustrate a crucial point: As a consumer, your liability for fraudulent credit card charges is almost always going to be $0. We should do what we can to protect our accounts, of course. But when bad things happen, the issuers and merchants pay for it — not you.
What protects you
It wasn’t a random act of kindness from the credit card issuer that saved me from paying for those fraudulent charges. In fact, my bank was just following the rules.
Here’s what protected me, and what protects you, from paying for credit card fraud:
- Federal law. The Fair Credit Billing Act caps your liability for credit card fraud at $50 per transaction. It’s $0 for transactions made after you’ve reported your card stolen, or for fraudulent online purchases and other card-not-present transactions. This law isn’t subject to time limits, says Lauren Saunders, associate director of the National Consumer Law Center. You’re protected even if you report the fraud months after it happens. The FCBA protects consumers’ credit card accounts to a greater degree than similar laws that shield consumers from fraudulent checking or savings account withdrawals or debit card fraud. As a result, credit cards are the safest form of payment.
- Zero liability protection. Credit card networks, like Visa and MasterCard, take the law a step further with zero liability protection policies. Under these rules, you aren’t liable for fraudulent purchases made on your account unless you’re guilty of “gross negligence.” Issuers define this term differently. For many, it means not reporting the fraud within two billing cycles, or falling behind on payments. But even if you did these things, Saunders notes, you’d still only be liable for up to $50, because you’d still be protected under the FCBA.
Because of these protections, you get the benefit of the doubt when you’re reporting fraud. Your issuer can’t charge you interest or fees on the transaction in question while it’s being investigated. After you dispute the charges, your issuer will freeze your account to prevent more fraudulent purchases and issue you a card with a new number.
Not all unwanted credit card purchases are protected under these rules. Your issuer won’t consider it fraud if an authorized user, such as your spouse or child, goes on a spending spree, for example. And if a purchase was made by a family member or close friend without your permission, it likely won’t be considered “unauthorized” unless you’re willing to file a police report.
But for mystery charges, like the one I received from Saks Fifth Avenue, these policies offer peace of mind. Even if your issuer denies your claim, the law is on your side. If you don’t have any luck with your issuer, file a complaint with the Consumer Financial Protection Bureau and provide supporting documents to have your dispute reconsidered.
Stay calm and read your purchase history
Often, your issuer will catch fraud before you do, as in my case, but don’t rely on that. Some charges can fall through the cracks, and you don’t want to end up unknowingly paying for things you never bought in the first place.
Review your credit card purchases regularly, and report any suspicious charges right away. This way, you can take full advantage of federal protections and your issuer’s zero liability policy.
Here’s how you can monitor your accounts easily:
- Download your issuers’ apps. Check your recent purchases with a couple of taps on your smartphone.
- Set up text notifications. Some issuers allow you to get texts whenever a purchase is made on your account.
- Check your mobile wallet history. With certain banks, you can view your entire purchase history on mobile wallet apps, such as Apple Pay, Samsung Pay and Android Pay.
Reviewing your purchases doesn’t have to take much time — maybe a few minutes per week, at most. But even a quick review of purchases can save you some hassle and money.
Doing our part
As consumers, we don’t have the power to completely eliminate fraud, no matter how careful we are.
We can’t control which issuers and merchants adopt EMV technology, ensuring more secure transactions. It’s not up to us to prevent future data breaches. We’re not going to ask the store clerk prior to every credit card transaction, “Before I go through with this purchase, can you show me proof that your store complies with the latest security standards?”
When it comes to fraud, our main responsibility as credit card holders is to report it. That’s all. We don’t have to investigate it, and we sure as heck don’t have to pay for it. Your issuer’s response upon receiving your report will probably start with “Thank you.”