Who Pays for Credit Card Fraud? Liability Explained

In most cases, you pay nothing for credit card fraud. Federal law caps your liability for unauthorized charges at $50, and the FTC says you owe nothing if you report the card lost or stolen before any unauthorized charges are made. Most major issuers go further with voluntary zero-liability policies that erase that $50 entirely. The issuer typically absorbs the loss first and credits your account, then sorts out with the merchant who ultimately eats the cost.

Key Takeaways

• You almost never pay for credit card fraud. Federal law caps your liability at $50, and most issuers waive even that.

• If only your card number was stolen, you owe nothing. The $50 cap only applies when the physical card itself is used.

• The issuer, the merchant or the payment network absorbs the loss, not you. Who ends up paying depends on how and where the fraud happened.

• Card-not-present transactions usually cost the merchant. Card-present fraud at a secure, chip-enabled terminal usually falls on the bank instead.

• A written dispute strengthens your legal protections. A phone call caps your liability, but a follow-up written notice triggers your card issuer's full investigation and reporting obligations.

• Resolved fraud shouldn't hurt your credit score. The risk comes from a missed payment or identity theft tied to the fraud, not the fraudulent charge itself.

MoneyLion

What's your gut say about where Fed rates and the economy go from here?

Things will start getting betterWe're in for more uncertaintyIt's going to get harder before it easesGenuinely no read on it at all

Summary generated by AI, verified by MoneyLion editors

Who Pays for Credit Card Fraud?

The cardholder rarely pays for credit card fraud. The cost usually falls to one of these parties:

The FTC says your liability for unauthorized credit card charges is limited to $50. If only your card number is stolen but not the physical card, you aren't responsible for unauthorized use at all.

How Much Can You Actually Be Charged?

Credit cards come with stronger federal protections than many other payment methods. The Fair Credit Billing Act (FCBA) limits your liability for unauthorized use and gives you dispute rights for billing errors.

Even though federal law caps liability, report fraud as soon as possible. Fast reporting stops more charges and speeds up replacement-card access. A phone call caps your liability and freezes the card, but the FCBA's stronger billing-error protections, like a guaranteed investigation timeline, generally require a follow-up written notice too.

Card-Present vs. Card-Not-Present Fraud: Does the Merchant or the Bank Pay?

Whether the bank or the merchant covers a fraud loss usually comes down to one distinction: was your physical card present at the point of sale?

This split exists because of the EMV liability shift, a card-network policy that took effect for most U.S. merchants in October 2015 and, after several delays, for gas station pumps by April 2021. Under this rule, whichever party, bank or merchant, failed to use available chip technology absorbs the resulting loss. Card-not-present transactions can't use a chip reader at all, so merchants bear that risk category by default, which is why online fraud tends to cost merchants more than in-person fraud.

MoneyLion offers a service to help you find personal loan offers. Based on the information you provide, you can get matched with offers for up to $100,000 from our top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you.

How Common Is Credit Card Fraud?

Credit card fraud is one of the most frequently reported forms of identity theft in the U.S. A few figures from 2025 show the scale:

• The FTC logged more than 1.3 million identity theft reports in 2025, part of roughly 3 million total fraud reports with losses exceeding $15.8 billion.

• Of those, roughly 598,000 reports specifically involved credit card fraud.

• 77% of individuals sentenced for credit card and other financial instrument fraud were men, according to the U.S. Sentencing Commission.

What Happens After You Report Fraud?

When you report credit card fraud, your issuer typically opens an investigation. The issuer may remove the disputed charge, issue a temporary credit and send a replacement card. The process generally looks like this:

1. You report the unauthorized charge.

2. The issuer freezes or closes the compromised card.

3. The issuer investigates the transaction.

4. The merchant may be asked to provide proof of authorization.

5. The issuer decides whether the charge was valid.

6. If fraud is confirmed, the charge is removed.

7. If the transaction is reversed, the merchant may receive a chargeback.

The CFPB says you should contact your card company right away to dispute a charge on your bill. Under federal billing-error rules, creditors generally must acknowledge a notice within 30 days and resolve the investigation within two billing cycles, not more than 90 days, tied to the written notice requirement mentioned above.

Who Pays After a Chargeback?

A chargeback is a transaction reversal that can happen after a cardholder disputes a charge. If the issuer finds the transaction was unauthorized, or the merchant can't prove it was valid, the merchant may lose the sale amount and face additional chargeback fees.

A merchant is more likely to absorb the cost if it:

• Accepted a transaction that turned out to be fraudulent.

• Can't provide proof of authorization.

• Failed to follow card-network verification rules.

• Processed a card-not-present transaction that's disputed as fraud.

• Faces chargeback deadlines and evidence rules that favor the cardholder.

Not every dispute ends with the merchant paying. In some cases, the issuer absorbs the loss, the claim is denied or the transaction is found valid after all.

Do the Fraudsters Ever Pay?

Generally, fraudsters don't "pay" in the way victims would prefer, since your losses aren't typically recovered directly from them. But credit card fraud carries serious legal penalties, including restitution, fines and prison time. The U.S. Sentencing Commission reports an average sentence of 28 months for convicted offenders, with 95% sentenced to prison.

Credit Card Fraud vs. Debit Card Fraud: What's the Difference?

Credit card and debit card fraud aren't treated the same way under federal law. With a credit card, a disputed charge is tied to borrowed money the issuer fronted. With a debit card, fraud can pull money directly out of your bank account while the investigation is still pending.

Because debit card fraud can expose you to higher liability and drain real cash from your account, many financial educators recommend a credit card over a debit card for online or unfamiliar purchases when possible.

How Do Credit Card Companies Investigate Fraud?

Card issuers use several signals to evaluate a disputed charge. They may review the transaction, merchant records and your account history, including:

If the merchant can't produce supporting evidence, the issuer may reverse the charge.

Does Credit Card Fraud Hurt Your Credit Score?

Credit card fraud shouldn't hurt your credit score once the charge is reported, investigated and removed. The real risk comes if it causes a missed payment, pushes your utilization higher, or ties into broader identity theft, any of which could pull your score out of good territory (670 to 739) or fair territory (580 to 669).

To protect your score while a dispute is open:

• Report the fraud quickly.

• Keep paying any legitimate charges on the account.

• Ask your issuer whether the disputed amount will be removed while the investigation is pending.

• Review your statements closely.

• Check your credit reports for unfamiliar accounts.

• Set up transaction alerts going forward.

If someone opened an entirely new card in your name, that's identity theft, and it can affect your credit report differently than a single fraudulent charge. In that case, review all three credit reports and consider a fraud alert or credit freeze, and see our guide on what to do if someone opens a credit card in your name.

How Can You Protect Yourself From Credit Card Fraud?

You can't prevent every fraud attempt, but you can reduce the risk and catch problems faster:

If your information turns up in a data breach, watch your accounts closely and consider credit monitoring or replacing the affected card altogether.

What Should You Do if It Happens to You?

A simple card replacement is usually enough for one compromised card. Consider filing a report at IdentityTheft.gov if the issue goes beyond a single unauthorized charge, such as:

• Someone opened a new credit card in your name.

• You see unfamiliar hard inquiries on your report.

• Your personal information was used for loans or other accounts.

• You receive bills for accounts you never opened.

• A creditor says your Social Security number was used.

• You see addresses or names on your credit report that aren't yours.

New accounts opened in your name are a more serious situation than a single compromised card and generally warrant a full identity theft recovery plan.

Bottom Line

Who pays for credit card fraud depends on where and how it happened, but it's very rarely you. Federal law caps your liability at $50, and most issuers waive that entirely, while the issuer, the merchant or the payment network sorts out the loss behind the scenes based on rules like the EMV liability shift and card-not-present risk.

Report fraud immediately, follow up in writing if you want the FCBA's full protections, and don't assume a fraudulent charge will hurt your credit score once it's resolved.

Key Terms

• Fair Credit Billing Act (FCBA): The federal law that caps consumer liability for unauthorized credit card charges at $50 and sets billing-dispute rights and timelines.

• Zero-liability policy: A voluntary card issuer policy that reduces your liability for unauthorized charges from the federal $50 cap down to $0.

• Card-not-present transaction: A purchase made without the physical card being shown, like an online or phone order, which shifts more fraud liability to the merchant.

• EMV liability shift: The card-network policy that assigns fraud liability to whichever party, bank or merchant, didn't use available chip-card technology.

• Chargeback: A transaction reversal initiated after a cardholder disputes a charge, which can result in the merchant losing the sale amount.

• Electronic Fund Transfer Act (EFTA): The federal law governing debit card and other electronic transfer liability, with tiered caps based on how quickly you report fraud.

Summary generated by AI, verified by MoneyLion editors

Sources

• Federal Trade Commission: Fraud Reports Data

• Consumer Financial Protection Bureau: Credit Card Billing Disputes

• U.S. Sentencing Commission: Credit Card and Other Financial Instrument Fraud Quick Facts

• Federal Trade Commission: Fair Credit Billing Act

• IdentityTheft.gov

Summary generated by AI, verified by MoneyLion editors

FAQ

Here are quick answers to common questions about who pays for credit card fraud.

Does the merchant or the bank pay for credit card fraud?

It depends on how the card was used. For in-person transactions where the merchant used chip-enabled technology, the bank usually absorbs the loss. For online or phone transactions, where the physical card isn't present, the merchant typically bears the cost. In either case, the liability doesn't usually shift to you.

Do banks actually refund money lost to credit card fraud?

In most cases, yes. Once you report unauthorized charges, your issuer removes the disputed amount, often as a temporary credit, while it investigates. If the charges are confirmed as fraudulent, that credit becomes permanent.

Am I ever responsible for fraudulent charges on my card?

You're generally not responsible for more than $50, and most issuers waive even that under a zero-liability policy. However, if you delay reporting the fraud, or if the issuer can show the delay caused additional losses, you may face somewhat more liability.

Does credit card fraud hurt my credit score?

Generally, no, once the fraud is reported and removed, it shouldn't affect your credit score. Fraud you ignore or don't get corrected, especially if it leads to a missed payment or a new account you didn't open, is what can actually hurt your score.

Can you go to jail for credit card fraud?

For the person committing the fraud, yes, jail time is a real possibility; federal sentencing data shows the vast majority of convicted offenders are sentenced to prison. There's no criminal liability for the victim.