Consumer Protections for Unauthorized Charges on Credit or Debit Cards

Most people know that it is critical to report any unauthorized charges on their credit or debit cards to the bank or credit card issuer immediately and to report any lost or stolen cards immediately to prevent fraud. This is simple and correct. If one reports within two days liability is limited to $50 and, in practice is usually waived entirely. If one does not notice the problem until later, liability is still limited to $500 for up to 60 days. After 60 days, liability is unlimited one is liable for all the charges made to the card.

Although there is protection both for credit and debit cards, there are significant differences in the process. With a credit card, if one disputes the charges, they are set aside and investigated before the consumer has to pay anything. The process is under credit card consumer regulations and is generally favorable to the consumer.

With debit cards, the transaction is immediately charged to the consumer’s bank account and consumer rights are governed by “Regulation E.” Under this regulation, “consumers must be given a temporary credit within 10 days while the bank investigates the potential fraud, but many banks offer such temporary refunds even more quickly.” And even negligence, such as giving a pin number to someone will not remove most consumer protections if the fraudulent transaction is reported promptly. (See http://www.nbcnews.com/id/8915217/ns/technology_and_science-security/t/know-your-rights-bank-account-fraud/#.VgiXOW5cAXU). Of course, this is only a temporary credit and, as with credit cards, the ultimate outcome depends on whether, after investigation, the charge is found to be valid.

In general, consumers are well-protected against fraudulent charges on credit or debit cards, but they must exercise reasonable care to promptly report any suspicious transactions.

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