What Is a Zero Liability Policy?
A credit or debit card’s zero liability policy means the cardholder is not liable or financially responsible for unauthorized charges in most cases. Credit card issuers typically provide stronger protection, though terms may vary. Many debit cards offer zero liability as well. It’s important to understand the limits set by federal law and if the issuer provides more coverage.
Key Takeaways
- Federal law protects you from liability if your cards or accounts are used to make fraudulent transactions.
- Many card issuers go beyond federal limits to offer zero liability policies that protect you from financial responsibility.
- Credit card issuers have varying criteria for zero liability.
- Keep tabs on your accounts to monitor for fraudulent activity.
How Zero Liability Policies Work
In general, zero liability policies reimburse you for charges when others use your credit card for without your permission. Zero liability policies may apply to personal and business accounts, debit cards, and credit cards.
The bank will investigate any claim you make of unauthorized use and it's possible your claim may not be valid. For example, if the bank finds that an authorized user used your account without your approval, the zero liability claim may not be valid.
While the bank investigates the fraud, it will likely offer a temporary credit within a few days after you make the claim.
Note
If the claim meets the requirements, the temporary credit is made permanent. However, the temporary credit is removed from your account if the claim isn't valid.
Zero Liability Policy Requirements
Zero liability policies frequently have exceptions. The cardholder agreement should specify these exceptions, so read it carefully.
You might not be covered by your zero liability policy if you:
- Weren’t responsible in handling your account or card.
- Gave someone else (even a family member or friend) your card, card number, or PIN.
- Took too long to report unauthorized transactions; your bank will lay out its reporting requirements.
- Don’t cooperate with the investigation, which may involve filing a police report.
Credit Cards
Credit cards offer better fraud protection than debit cards. According to federal law, credit card issuers are responsible for covering the costs associated with fraudulent credit card charges.
If you notice and report a charge that doesn’t belong on your credit card, you aren’t liable for any charges. But if you fail to report the fraud on time, you may need to pay a maximum of $50 toward the charges.
Debit Cards
Debit cards are subject to a different set of federal rules. With debit cards, your responsibility is determined by how soon you reported the fraud and whether the physical card or card number was involved. Here’s are come key federal protection rules:
- If a debit card you already reported as lost or stolen is used for fraudulent charges, your liability is $0.
- If you report the card lost or stolen within two business days of the fraud, your liability is limited to $50.
- If it takes you longer than two days to report the loss, the maximum liability is $500 during the first 60 calendar days after the bank statement is made available.
- Beyond 60 days, all your money in that account and linked accounts could be vulnerable.
If your physical card wasn’t used to commit the debit card fraud—just the card number—you have up to 60 days from your statement mailing date to report the incident before you are liable.
However, debit card issuers may voluntarily offer zero liability policies that are more consumer-friendly than federal protections.
Policies vary from issuer to issuer and card network to card network.
Zero Liability Policy Examples
Bank of America
Bank of America offers a $0 Liability Guarantee for account holders, which covers fraudulent transactions made by others using your Bank of America debit and credit cards. For this coverage, you must report transactions made by other people promptly. However, you are not allowed to share personal or account information with anyone.
Chase
Chase bank also offers Zero Liability Protection. This policy fully reimburses unauthorized debit card transactions if account holders report fraud promptly. Chase defines “promptly” as within 60 days for personal accounts and 30 days for business accounts.
Capital One
If your Capital One Debit Mastercard is lost or stolen, you have no liability for unauthorized charges. Like other banks, Capital One expects you to report fraud as soon as possible after spotting an unauthorized transaction.
Mastercard
Mastercard says that cardholders will not be held responsible for unauthorized transactions if "1. You have used reasonable care in protecting your card from loss or theft; and 2. You promptly reported loss or theft to your financial institution." However, this zero liability doesn’t apply to Mastercard payment cards, including unregistered gift cards.
Visa
Visa's Zero Liability Policy replaces funds stemming from an unauthorized credit or debit transaction within five business days after you notify them. Once again, this policy doesn’t apply to anonymous prepaid cards.
How Fraudulent Card Charges Happen
Fraudulent charges can appear on a credit or debit card account in a few different ways, such as through a data breach, skimming, or phishing.
Data Breach
Hackers sometimes access organizations’ databases via a data breach, stealing customer card information or other personal information.
These numbers are sold on the black market; purchasing scammers use the numbers to make unauthorized purchases. The fraudsters’ goal is to make card purchases before you report the fraud to your card issuer.
Your banking institution or credit issuer might contact you to ask about suspicious charges. To be safe, it’s always best to hang up and call the issuer directly to inquire if the scammer is calling to get more of your personal information.
Skimming
Through skimming, criminals tamper with a credit or debit card swiping device at an ATM, store, or gas pump to steal card information. The information is then used to make unauthorized purchases.
Using cards with embedded microchips or mobile wallets can help avoid this situation. When using a machine, inspect it well to ensure no skimmer devices are attached.
Phishing
Phishing scams use fraudulent emails or texts that pretend to be from a trusted company or government agency. Unsuspecting consumers hand over their personal information after requesting a login—but inadvertently submit account information to a fraudster.
How Do You Report Credit or Debit Card Fraud?
Contact your bank or credit issuer by phone when you see a suspected fraudulent charge. From there, the Federal Trade Commission (FTC) also suggests following up immediately with a letter to the bank that includes all the pertinent details. These details include your account number, the date and time you think your card was missing, and the date you reported the fraud. This creates a paper trail to prove you reported the charges.
What Is a Validation Code?
A validation code often called a CVV code, is a three- or four-digit number on the front or back of your credit or debit card. The code adds a layer of protection in online or phone transactions. Thieves who attempt to use your card number without the physical card can’t supply the validation code if asked.
Do Prepaid Cards Have Zero Liability Protection?
Prepaid cards typically do not have the same federal protections as credit and regular debit cards. However, some issuers and networks may provide liability protection if you register the card in your name.
The Bottom Line
While federal law provides some liability protections to credit and debit cardholders whose cards, or card numbers, have been used in fraudulent transactions, many card issuers go beyond that. Zero-liability policies help further limit the cardholder's financial exposure, so it’s always good to have one. Just be sure you keep tabs on your accounts so that you can spot fraud and report it immediately.
