A:

In the event that your credit card is stolen in the United States, federal law limits the liability of card holders to $50 regardless of the amount charged on the card by the unauthorized user. In today's world of electronic fraud, if just the credit card account number itself is stolen, federal law guarantees that the card holder has a zero liability to the issuer.

As a card holder, you should notify the issuer immediately if you notice that your credit card is missing or stolen. This early notification will give the issuer time to help you with the following:

1. Verify if and where fraud has occurred.
2. Remove unauthorized charges from your credit.
3. Close down your account to prevent future fraudulent charges.
4. Issue you a new card and account number.

Several credit card companies have adopted a "zero liability" policy which means the consumer is not held responsible for any fraudulent charges. You should also check with the three major credit reporting agencies and obtain a copy of your credit report to be sure that nothing else has been accessed fraudulently.

Be wary of credit card protection offers. This type of insurance is unnecessary because federal law limits your credit card fraud liability. But scam artists try to sell $200-300 credit card insurance by falsely claiming that cardholders face significant financial risk if their cards are misused. According to recent Federal Trade Commission estimates, 3.3 million consumers have purchased unnecessary insurance to prevent unauthorized use of their credit cards. (For related reading, see 6 Major Credit Card Mistakes and Expert Tips For Cutting Credit Card Debt.)

This question was answered by Steven Merkel

RELATED FAQS

  1. Are 'gray' credit card charges legal?

    Read the fine print and all credit card statements carefully to avoid misleading charges that often go unnoticed on credit ...
  2. What is the difference between "closed end credit" and a "line of credit?"

    Find out about the difference between closed-end credit and lines of credit, and how both closed- and open-end credit is ...
  3. How should a whistleblower report unlawful or unethical behavior?

    Read about the nature of whistleblowing, its possible consequences, and how to know the best way to alert the authorities ...
  4. How do insurance companies use a whistleblower?

    Read about the practice of whistleblowing to help insurance companies detect and prevent fraudulent insurance claims or recoup ...
RELATED TERMS
  1. Transferable Points Programs

    With transferable points programs, customers earn points by using ...
  2. Luhn Algorithm

    An algorithm used to validate a credit card number.
  3. Roll Rate

    The percentage of credit card users who become increasingly delinquent ...
  4. Truncation

    The requirement mandated by the FTC for merchants to shorten ...
  5. Purchase Money Security Interest (PMSI)

    A security interest or claim on property that enables a lender ...
  6. Linked Transfer Account

    Accounts held by an individual at a financial institution that ...

You May Also Like

Related Articles
  1. Credit & Loans

    Are 'gray' credit card charges legal?

  2. Credit & Loans

    Credit Card Review: Amex EveryDay

  3. Credit & Loans

    Credit Card Review: Capital One Venture ...

  4. Credit & Loans

    Credit Card Review: BankAmericard Cash ...

  5. Credit & Loans

    What to Know About Transferable Points ...

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!