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Are You Liable for Unauthorized Credit Card Charges?

If you have ever lost your credit or debit card, you know the sinking feeling in your stomach as you wonder what has been done without your knowledge. Don't panic too much! Federal laws place limits on your personal liability for unauthorized credit card charges. Always notify your bank as soon as you realize that your physical card has been lost or stolen. This is the best way to limit your liability for fraudulent transactions on your credit card account.

Liability for Credit Card Fraud

Imagine arriving at the store, checking your wallet, and realizing that your credit card is missing. The fear of unauthorized purchases and potential damage starts to set in.

If you report the loss or theft of your credit card (usually within 30 days), the Fair Credit Billing Act (FCBA) offers protection. You are not responsible for fraudulent charges made after notifying your credit card company. For unauthorized charges, you might only be liable for $50. Some cardholders are fortunate enough to have this amount waived by their credit card companies.

If you suspect your credit information, like your stolen credit card or account number, has fallen into the wrong hands, you can also place a fraud alert on your credit report. This alert notifies the major credit bureaus that your personal information has been compromised. This allows your credit bureau to add extra layers of verification when anyone attempts to access your credit report. By doing so, you can guard against unauthorized transactions and potential harm to your credit score.

It is important to remain vigilant against identity theft and scams.  Make sure to report any compromised credit card number to both your credit card issuer and the Federal Trade Commission (FTC). Doing so can further safeguard you against potential financial losses.

Liability for Unauthorized Use of ATM and Debit Cards

If you have lost your ATM or debit card, or if it has been stolen, it is very important to notify your bank as soon as possible. By doing so, you will minimize the amount of liability you will have for any unauthorized use of these cards. In the case of ATMs and debit cards, the Electronic Fund Transfer Act (EFTA) sets forth the rules. Under the EFTA, your liability for lost or stolen ATM or debit cards is:

  • $0 if you are able to report your lost or stolen ATM or debit card immediately and before the card has been used
  • $50 or less, if you report your card lost or stolen within two business days
  • $500 or less, depending upon the amount that has been used, if you do not report your card lost or stolen within two business days, but you do report it within 60 days after your bank statement is issued that shows the unauthorized use
  • Any amount if you fail to notify the bank of your lost or stolen card within 60 days after your bank statement is used that shows the unauthorized use

If your bank or financial institution claims that you are liable for unauthorized charges or withdrawals that exceed $50, it must be able to show that the additional loss past that amount would not have occurred if you had given timely notice of the missing card. However, the requirement for timely notice is sometimes extended due to extenuating circumstances.

Other Considerations

The Electronic Fund Transfer Act allows banks and other financial institutions to place their own, voluntary caps on liability for unauthorized credit card charges and use of ATM and debit cards. You should ask your financial institution about any voluntary liability caps that they abide by, as it could save you a lot of money if your cards are ever lost or stolen.

Overall, it's important to stay informed and communicate with your financial institution. Take advantage of available legal protections to ensure your financial well-being in the event of unforeseen circumstances involving your cards. If you are in a dispute with your credit card company about fraudulent activity on your card, reach out to a consumer protection attorney near you.

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