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 Small-business owners using outdated swipe payment terminals may have to make up the difference.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.
FAQs
As a credit card holder, you're also protected by the Fair Credit Billing Act, or FCBA, which states that if your credit card has an unauthorized transaction or is stolen, you will only be liable for a maximum of $50. If your card is stolen and you report the theft before any loss occurs, your liability drops to $0.
What happens to someone who commits credit card fraud? ›
Federal Law. Certain federal credit or debit card fraud laws focus on interstate and foreign commerce. These federal crimes make it illegal to use a stolen or fraudulently obtained credit or debit card. These are felony charges, and the penalties may include up to 10 years in prison and fines of up to $10,000.
Do banks reimburse credit card fraud? ›
In general, when a bank is notified about an unauthorized electronic transfer, it must investigate the situation and report to the account holder in a specific amount of time. If the transaction is unauthorized, the bank must refund all or part of the money depending on how quickly the account holder notified the bank.
Who loses money in a credit card fraud? ›
In many cases, card issuers, merchants, payment processors and ATM transaction processors eat financial losses attributed to credit card fraud.
Is bank liable for credit card fraud? ›
If loss is due to customer's negligence, such a sharing of payment credentials, the customer shall bear the entire loss until they report it to the bank. Any loss that occurs after the transactions has been reported to the bank, will be borne by the bank.
Who ends up paying for credit card fraud? ›
You, the consumer, typically aren't liable for credit card fraud, but someone pays the tab. So who foots the bill when a thief uses your credit card or its number to illegally buy stuff? The short answer is it's typically the merchant where you bought something or the bank that issued the credit card.
Can police do anything for credit card frauds? ›
But fraud victims can also consider: Filing a police report. The police can then investigate the matter and potentially file felony charges against the culprit. If the thief is found and convicted, the judge can order that the thief pay victim restitution; or.
Do banks actually investigate credit card fraud? ›
Once a potential fraudulent transaction is flagged, banks deploy specialized investigation teams. These professionals, often with backgrounds in finance and cybersecurity, examine the electronic trails of transactions and apply account-based rules to trace the origin of the suspected fraud.
Do credit card fraudsters get caught? ›
Some estimates say less than 1% of credit card fraud is actually caught, while others say it could be higher but is impossible to know.
Do banks repay fraud? ›
If you've transferred money to someone because of a scam
This type of scam is known as an 'authorised push payment'. Your bank or building society should reimburse you if it's registered with the Lending Standards Board under their Contingent Reimbursem*nt Model Code (CRM Code).
The bank that issues the credit card will cover most credit card fraud issues, but sometimes the bank rules that it is merchant credit card fraud, making the merchant responsible. Small business owners using outdated swipe payment terminals may have to make up for the difference.
Who is liable for payment fraud? ›
Liability rests with the bank that issued the cardholder's card, and if the purchase is later deemed to be fraudulent, the merchant is not responsible for refunding the customer.
Do credit card companies go after fraudsters? ›
Credit card companies and merchants put many measures in place to prevent credit card fraud, and they'll investigate fraud when it happens. Generally, you won't be responsible for any unauthorized charges if you report the card stolen or dispute unauthorized transactions right away.
Can the bank find out who used my credit card? ›
Yes. Tracking who used a credit card is often possible, especially if the fraud involved physical transactions at identifiable locations or digital transactions with traceable IP addresses and device information.
What are my rights with credit card fraud? ›
The FCBA limits a consumer's liability for unauthorized use of his or her credit card to $50. Fraud involving an ATM or debit card is covered by the Electronic Fund Transfer Act (EFTA). A consumer is not responsible for any charges made on an ATM or debit card if he or she reports it lost or stolen before it is used.
What happens when credit card fraud is reported? ›
This could also involve requesting police reports and receipts to compare signatures. The card issuer must respond within 30 days of receiving a report, but the investigation can take up to 90 days. During this time, you won't have to pay for the disputed charges, and you won't get charged interest on them, either.
What is the punishment for credit card scamming? ›
a misdemeanor credit card fraud conviction is punishable by up to one year in county jail and a fine up $1,000 fine; a felony credit card conviction is punishable by 16 months, 2 or 3 years in jail and a fine up to $10,000.
What happens when you report someone for credit card fraud? ›
This could also involve requesting police reports and receipts to compare signatures. The card issuer must respond within 30 days of receiving a report, but the investigation can take up to 90 days. During this time, you won't have to pay for the disputed charges, and you won't get charged interest on them, either.
Can you get in trouble for lying about credit card fraud? ›
Filing false chargebacks can lead to legal repercussions, as it can be deemed as fraud. If a cardholder knowingly disputes valid transactions to evade payment, they could face criminal charges, fines, or even imprisonment.
Is credit card fraud a financial crime? ›
In today's complex economy, fraud and financial crimes can take many forms. The reliance on computers and the internet provides fertile ground for new fraud schemes. Read on to learn about the more common forms of financial crimes, including credit card fraud, forgery, identity theft, embezzlement, and more.
