How Zero Fraud Liability Policy Protects Your Credit Card

Waiter swipes credit card through a terminal
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These days just having a credit card puts you at risk of becoming a victim of credit card fraud. Thieves have a number of ways of stealing your credit or even your credit card number and using the information to make unauthorized charges on your account. Thankfully, all four major credit card networks — Visa, MasterCard, Discover, and American Express — offer zero fraud liability. This policy will keep you from being liable for most fraudulent charges that happen on your account.

What does zero fraud liability really mean and how much protection do you really have?

How Does Zero Fraud Liability Work?

Zero fraud liability protects you from unauthorized charges made to your credit card account. Many policies cover you whether these charges were made online or in-person. You don't have to register or pay for zero fraud liability — the feature automatically comes with your credit card.

When you spot unauthorized transactions on your account or suspect that your account may have been used without your permission, you should contact your credit card issuer right away. If you still have your credit card in your possession, contact your credit card issuer via the number on the back of your credit card. Or, log on to your online account to get the correct phone number for your credit card account.

Catching Fraud on Your Account

You can spot fraudulent charges by reading your credit card statement or monitoring your account activity online.

You can catch unauthorized transactions faster if you check your account online periodically throughout the month rather than waiting on your credit card statement to come in the mail.

Your credit card issuer may offer complimentary fraud detection services to proactively notify you of potential fraud to your account.

Once you sign up, you'll receive a text, email, or phone call that alerts you to credit card activity outside your normal spending habits. Discover, for example, will occasionally ask you to verify unusual activity when you log on to your online account. Contact your credit card issuer to find out if a service like this is available for your account.

Zero Liability Exceptions

Zero liability typically only applies to consumer credit cards. Commercial cards, some prepaid cards, and some gift cards may not qualify for zero liability protection. If you have one of these types of cards, take extra precautions to keep your card and your card information safe.

Make sure you read the fine print of your credit card agreement to find out if any restrictions apply. For example, Visa USA's zero fraud liability only applies to cards issued in the United States. MasterCard requires that you have used "reasonable care in protecting your card from loss or theft."

The coverage for credit cards and debit cards is different. Debit cards issued by Visa or MasterCard may be covered under their zero fraud liability policies, but only when the transactions are processed on their networks. When you complete your transaction as “credit,” it will likely be processed on a Visa or MasterCard network, based on the logo on your debit card.

However, when a PIN is used to complete the transaction, it's more likely that it will be processed on a different network and therefore isn't covered under the Visa or MasterCard's zero liability policy.

Your Fraud Liability Coverage Under Federal Law

In a sense, your liability for fraudulent charges is double protected. Under the Truth In Lending Act, you can only be held liable for up to $50 of fraudulent charges made on a stolen credit card. You can be held liable for that maximum amount if you report your card lost or stolen after the fraudulent charges are made. If only your credit card number is stolen and used to make fraudulent charges on your account, you have zero liability.

With debit cards, the Electronic Funds Transfer Act limits liability to $50 if you notify the bank within two days of discovering the fraud on your account.

However, if you wait until after that two days, you could be liable for up to $500. And, if it takes you more than 60 days to report fraud on your debit card, you could be liable for the entire amount.

Your bank or the credit card network (e.g. Visa or MasterCard) that issues your debit card may limit your liability, but it depends on the network on which your card is processed, whether a PIN was used for the transaction, and the amount of time it takes you to report the fraudulent charges.