You’re Not Liable for Credit Card Fraud but Here’s What to Do About It

Credit card user

Every year, so many people worldwide fall victim to credit card fraud. And even though you are not liable, the process of dealing with this issue is never a particularly pleasant one.

Here are the most important things you need to know about credit card fraud and how to deal with it.

What is credit card fraud?

This type of fraud occurs when someone uses your credit card for a purchase or to access your account without your knowledge or permission.

The scammer can have your credit card but doesn’t necessarily have to. The scam can be successfully committed even without an actual physical card, as long as they acquire your personal information.

Don’t confuse fraud with a dispute. There is one key thing to tell them apart – permission.

If you don’t agree with how the company has used your card, but you gave them permission and authorized the purchase, it is a dispute, not a fraud.

The process of resolving a dispute is different from reporting fraud.

Different types

In order to maintain their fraudulent ways, thieves have to evolve their techniques and different forms of fraud, making them more sophisticated. As a result, global fraud statistics are on the rise.

So, various types of credit card fraud have been developed over time:

  • lost or stolen card – it is sort of an old-school type of fraud in which someone uses the card you lost all it was stolen from you
  • a counterfeit card – it means that someone created a fake card with your personal information that they gathered with a device called a skimmer (it can read and store all your data)
  • card-not-present – it happens when someone gets ahold of your card details but doesn’t have the actual card. This fraud can be committed over the phone or online
  • account or application fraud – if someone has the details such as your address, Social Security number, birth date, etc, they could open an account in your name and apply for a credit card
  • an intercepted card – a card in transit can be easily stolen (for example, from your mailbox)

What to do when credit card fraud occurs?

Many credit card companies adopted the zero liability policy, meaning that you are not responsible for fraudulent charges.

However, there are still some steps you need to do when fraud occurs.

Early detection

Sometimes months can go by before a sign of fraud is detected. By then, a lot of damage can already be afflicted to your bank account.

Early detection is key and the sooner you notice and report the fraud, the easier it will be to resolve the issue.

Acting quickly (preferably within 60 days) on any suspicious charges can also minimize your liability.

Reporting the unauthorized credit card charges

Once you spot the unauthorized activity you need to report it to your credit card company.

When doing so, make sure it’s the official credit card issuer (official website, the phone number on the back of the card, or on the billing statement) otherwise you are risking someone else acquiring your information.

The compromised account will be closed, followed by the proper procedure for this situation.

Proper protection

To ensure even further the protection of your rights it would be a good idea to follow up with a dispute letter, explaining the charges that have been made.

You can reference the report you made, mentioning the company’s representative that handled your case.

Will it have an impact on your credit?

Yes, credit card fraud can make quite a lot of damage to your personal and business finances, especially if it goes unnoticed for a longer period of time.

It can affect your credit in two main ways:

  • late payments on your credit report – payment history is the biggest factor for credit scores. The scammer has no intention of paying the bill and since the card is opened in your name, your credit score is going to plummet
  • high credit utilization – another important factor for credit scores is credit utilization ratio. With unauthorized charges, your expenses will exceed your credit limits.

Whether is your personal account or a business one, you can only think about recovering and improving your financial efficiency once everything is sorted out.

Is there any way to prevent it?

There are a few actions you can take to minimize (it’s impossible to completely eliminate the risk) your chances of becoming a victim of credit card fraud.

  1. be wary of protection offers – carefully approach any third-party companies that offer theft insurance since it can be an additional opportunity for scammers to get your information
  2. always monitor your reports – an occasional check-in of your credit card activity on the card’s main website is a good way in providing a proper insight and alert you if there is any suspicious activity.

Don’t forget, you can never be too careful when it comes to your personal information.

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