What Is $0 Fraud Liability And Do All Credit Cards Have It?

by Chauncey Crail

Forbes Advisor

Wednesday May 5, 2021

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Stock image  (Source:Getty Images)

Zero fraud liability, a policy many credit and debit cards advertise to consumers as a safety measure against theft or fraud, seems like a stand-up thing for card companies to do. Federal Law requires consumers not be liable for more than $50 in charges that result from lost or stolen card information. This means that many credit card holders are not responsible for unauthorized purchases — at least for more than $50.

Zero liability remains a standard inclusion for many consumer cards in the U.S. However, corporate or business card servicers are not legally required to offer zero liability for their cardholders. Even if they do, business card holders should also be careful giving card access to employees. Any charges racked up by a disgruntled employee do not usually count as fraud (because the employee is the one using the card) and will not be protected. Always double-check the details of a card's liability protection by calling the number on the back of a credit or debit card or by checking the issuer's website.


How does $0 fraud liability work?

In most cases, any fraudulent purchase made on a covered credit card is protected by zero liability no matter the size and no matter how the purchase was made (in-person or online). It's up to the credit card holder to report fraudulent charges to their credit card issuer as soon as the charges are discovered. Then the servicer will remove or cancel any unauthorized purchases after conducting an investigation and restore funds. Typically, the cardholder will not be liable for any fraudulent charge. However, if a credit card does not offer $0 liability, cardholders may be liable for up to $50 in charges.

The four major credit card networks in the U.S. automatically cover any cardholder with a zero liability policy. Each major network is outlined below (remember to double-check this information with a particular card issuer, as terms and conditions change regularly).

Visa

Visa credit cards are covered by $0 fraud liability protection. Some commercial and prepaid cards are not protected.

Discover

All credit cards are protected.

American Express

American Express credit cards offer $0 fraud liability.

Mastercard

Consumer credit cards offer $0 fraud liability protection. Commercial cards and unregistered prepaid cards are not protected.


Are debit cards covered by zero liability protection?

Some debit cards offer similar zero liability protection but it greatly depends on which type of card and details surrounding the discovery. The Electronic Funds Transfer Act limits a cardholder's liability to $50 if the debit card holder notifies the bank within two days of discovering fraud or after losing their card. If the cardholder waits longer than two days, then they may be liable for up to $500. If the cardholder waits more than 60 days, they may be liable for the entire amount. Always read the fine print and call the bank to ensure any card's protection. Who isn't covered by zero liability?

Credit and debit card companies offer zero liability for every eligible cardholder. But if the cardholder is not in good standing, they may not receive the same level of protection. Situations in which the cardholder may be liable include whether the cardholder is delinquent on payments, waits too long to file a claim or irresponsibly shares card information (e.g. sharing pins with multiple people).


How can someone catch fraud?

Regularly review account statements and account activity online to catch fraudulent charges. Enabling mobile alerts offers a convenient solution, with real-time updates on purchases made or suspicious activity. Many credit or debit card issuers also offer complimentary fraud monitoring services via text, phone or email alerts. For example, if the cardholder resides in Los Angeles, CA and suddenly there are three purchases made in Madrid, Spain, the card issuer may contact the cardholder immediately to verify suspicious charges. Contact a card issuer to see if they offer this service.


How can someone protect themselves against fraud?

Sometimes opting to use a credit card to make purchases instead of a debit card is the best form of protection. Skimming machines installed by thieves can rip card information when the cardholder innocently buys something. If a credit card is skimmed, it's much easier to handle fraudulent charges because money has not been stolen directly from a bank account. Instead, the cardholder simply loses access to that credit line until the issuer resolves the incident and sends over a new card.

Checking account activity regularly either online or on a mobile app is also a great way to monitor purchases.

Remember to call the bank or card issuer to confirm that they offer zero liability protection.

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