What You Need to Know About Debit and Credit Card Fraud

NEW YORK (MainStreet) — There’s no question that payments fraud is a worrisome issue for most consumers. It’s understandable too, seeing as losses resulting from credit and debit card fraud amounted to roughly $3.6 billion in 2010 (the most recent year for which data is yet available), according to The Nilson Report.

Still, there’s also no question among those in the know that consumers don’t have much to worry about. Card networks and issuers offer fairly comprehensive zero-dollar liability guarantees, and federal law provides another safety net, further reducing the likelihood that you’ll incur fraudulent losses.

That’s not to say you’re always covered. Besides, even when you are shielded from ultimate financial loss, fraud can still be a major pain to deal with. That’s why it’s always important to understand when you are and are not liable, what steps you can take to mitigate hassle as well as monetary loss, and which spending vehicles will protect you best.

The fraud liability landscape

Card Hub’s 2013 Consumer Fraud Liability Study helped shed some light on these matters, and the following are among its main findings:

  • All four major card networks — Visa, MasterCard, Discover and American Express — boast zero-dollar liability guarantees for unauthorized credit card transactions and signature debit card transactions.
  • Consumer liability for PIN debit transactions depends on the card network as well as the manner in which the transactions are processed. Discover extends zero-dollar liability to debit card purchases “verified” by PIN, and American Express does not offer debit cards with PINs. Visa cardholders are covered only for unauthorized PIN debit transactions processed over Visa’s network, but consumers have no way of knowing how a given transaction will be processed. MasterCard does not provide additional liability coverage for PIN debit transactions.
  • While Discover and American Express don’t hold customers liable for unauthorized ATM transactions, they account for a tiny portion of the ATM market. Visa and MasterCard policy pertains to most people, and those particular networks don’t provide liability protections on top of what may be available from issuing banks and federal law.
  • Federal law limits liability for unauthorized credit card and debit card transactions to $50 when reported within two business days and $500 when reported within 60 days. If you don’t report suspicious account activity within 60 days, you may find yourself unprotected.

What this means for consumers