Zero liability doesn’t stand for zero responsibility

With credit scam running rampant these days, millions of people are afraid of seeing unauthorized transaction on their credit card statements. To entice consumers into using their plastics, credit card issuers such as Visa and MasterCard offer zero liability policy. It will cover your losses if someone fraudulently uses your plastic and racks up a huge bill. However, there is no law that obliges lenders to do so. It all depends on their terms and interpretations. You may not be as protected as you think under certain circumstances. 

Credit card fraudsters are constantly creating new ways of fooling customers and stealing their money. When you are handling your plastic to a waiter at a restaurant, it can be swiped through a small device that copies the information from magnetic stripes. Dumpster divers can find credit card statements or old receipts in trash bins. And there are phishing e-mails that try to make people visit fake websites and enter sensitive financial information.

Luckily, there are dozens of ways how credit card issuers protect their customers’ accounts, starting from monitoring credit card activity to detect unusual transactions to using innovative fraud detection systems. Trying to reassure their customers, lenders offer 0% liability on fraudulent charges. It claims that if you report the theft promptly, your credit card issuer won't hold you responsible for any unauthorized purchases.  

However, keep in mind that zero liability is not always zero. While you may get a provisional credit for unauthorized purchases, its amount is subject to review. The provisional credit may be withheld, limited, delayed, or rescinded by your lender based on factors such as gross negligence, delay in reporting, investigation and verification of claim and account standing and history.

Have a look at the list of typical exclusions from zero liability coverage. They may vary for each issuer, so it makes sense to find out which terms apply to your credit card. Ignorance is not a defense in case of any problems with your credit card account. When you sign the application, you agree to abide by the terms whether you understand them or not. 

•    Your account must be in good standing. Missed a couple of credit card payments? In this case you may be out of luck if a criminal uses your credit card number to make unauthorized purchases. 
•    You must notify your bank immediately of any unauthorized use. If you report the fraudulent purchases promptly, you don't have to pay a penny of them. But if you notice these charges after several months when the amount of purchases has significantly grown, you’re out of luck.
•    You must have exercised reasonable care in safeguarding your card. If your bank thinks you are to blame for your credit card number getting stolen, they won't reimburse you for fraudulent purchases. So if you think that you can leave your plastic on a table for a couple for hours, think again.
•    ATM withdrawals and PIN transactions are not covered. Zero liability covers purchases made in stores, over the telephone, or via the Internet, but not ATM withdrawals (made with your PIN number). On the other hand, signed purchases are covered because they are processed through trusted networks.
•    You have not reported two or more unauthorized events in the past 12 months. Be careful: with MasterCard credit cards, the number of unauthorized events you can report about is limited.

On the positive side, you can easily avoid financial losses by using your common sense. Keep an eye on your plastic while it is being processed, don’t leave your cards lying around in the open, don’t keep any written copies of your PIN with the card, and check your statement carefully. These are basic precautions that you need to follow anyway because you play the most important role in safeguarding your account. Zero liability doesn’t stand for zero responsibility.