Who Pays for Credit Card Fraud?

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If you’re wondering who pays for credit card fraud debt, the good news is that it’s rarely the consumer. Between federal regulations and card issuer policies, the maximum you should be liable for is $50, as long as you report the credit fraud charges in time. You have 60 days from the time the fraudulent charge appears on your account to report it. Find the details of who pays for credit card fraud, plus tips to protect your sensitive information below. 

And keep reading to the end to see how you can search offers to help build credit from our trusted partners through MoneyLion!

Credit card liability explained

Credit card liabilities refer to the financial obligation you create when you use a credit card. A liability is a debt with an obligation to repay it. All credit card purchases create a liability to repay the borrowed funds. As long as you make the charges and repay them yourself, there are no fraud issues. 

If a hacker or criminal gets hold of your credit card information, you’ll end up with a fraudulent credit card liability. Fraud can happen in several ways. Cybercriminals can obtain credit card details by hacking into businesses holding your information. Data breaches have become increasingly concerning in recent years, exposing login credentials, home addresses, financial account numbers, and other sensitive information. 

In addition, hackers regularly attempt to use phishing emails to steal people’s information while posing as reputable brands. These emails have become increasingly sophisticated and more difficult to spot, especially when there’s an urgent call to log into your bank account to resolve an issue. 

When merchants pay for credit card fraud

The bank that issues the credit card will cover most credit card fraud issues, but sometimes the bank rules that it is merchant credit card fraud, making the merchant responsible. Small business owners using outdated swipe payment terminals may have to make up for the difference. Merchants are also responsible for credit fraud charges if the hacker makes an unauthorized online purchase. Sometimes banks suggest merchant responsibility for stolen credit card information if it is due to poor security or outdated systems.

As a credit card holder, you’re also protected by the Fair Credit Billing Act, or FCBA, which states that if your credit card has an unauthorized transaction or is stolen, you will only be liable for a maximum of $50. If your card is stolen and you report the theft before any loss occurs, your liability drops to $0.

When cardholders pay for credit card fraud

Cardholders are rarely responsible for credit card fraud. Even under these rare circumstances when you’re considered liable, FCBA limits your liability to $50. Some banks have zero liability policies that waive the $50 loss, protecting you from the fraudulent behavior. However, you must report suspicious credit card activity within 60 days of it appearing on your billing statement to avoid paying for the fraudulent activity.

What about cases of debit card fraud?

Debit cards do not have the same built-in protections as credit cards, thus carrying a greater risk of being liable for fraudulent charges. To protect yourself, immediately reporting debit card fraud can help you avoid costs, but it’s not a guarantee. Since debit cards deduct funds directly from your bank account, your bank account likely won’t be replenished immediately, if at all. Freezing your debit card can limit the damage as you wait to see what will happen to the stolen funds. Stay closely in touch with your bank if you’re in this situation.

What to do if credit card fraud happens to you 

It’s essential to act quickly if you detect suspicious credit card activity. Debt can accumulate, and you only have 60 days to report fraudulent spending to your bank if you want to help prevent the amount of money you could be out. You should review your finances to minimize the likelihood of becoming a victim of credit card fraud. 

Notify your credit card company

Create a list of suspicious credit card transactions and notify your card issuer about the activity. Your credit card company can help reduce the damage and cover you for fraudulent activities. 

Remove unauthorized charges

Consumers can request that their credit card providers remove unauthorized charges. This step prevents credit fraud charges from harming your payment history, a critical component of your credit score.

Close the account

If a hacker has your credit card details, they won’t stop spending unless you hit the brakes. You can ask the credit card issuer to send you a new credit card with a new number and cancel the previous card. This maintains your credit history and keeps the credit account open but stops the hacker from using the card number they have. In most cases, the issuing bank will send the new card to you worldwide. This option shouldn’t affect your credit score. 

Of course, you can also close the credit card account, but this can hurt your credit length, especially if it’s the oldest credit line you have. You can ask your bank whether it’s necessary and worth the short-term credit downside to keep your finances safe. 

Double-check your other accounts

Some hackers don’t stop with your credit card. They can also use your personal information to take out loans and lines of credit. If someone steals your credit card information, you should check your credit report, as it will provide a snapshot of your financial activity. You should also immediately act if you see anything suspicious on another credit account. 

Placing a fraud alert on your credit or, better still, temporarily freezing it can keep your credit safe. You can learn how to place a security freeze on your credit accounts and lift it when you’re sure your information is safe. 

Open a new account

If you freeze your credit, you won’t be able to apply for any new credit card accounts. However, if the fraud was isolated to one credit card, you may not need to freeze your credit. In that case, you can open a new account if needed. You will still be responsible for any credit card debt on the previous card outside of any suspicious activity. You can use the new credit card for purchases and continue building your credit score. 

Don’t delay

In the case of credit card fraud, it’s important to act as quickly as possible. You must notify the bank about suspicious activity within 60 days for financial protection. Dealing with the issue now will minimize the damage, and you may discover hackers have obtained additional information after reviewing your credit report. If needed, you can contact each of the three credit bureaus to let them know you are a victim of fraudulent activity.  However, it’s usually enough to contact your bank and request a new credit card. 

If you do check your credit reports, you can also remove old addresses (if necessary) and double-check all accounts listed in your name to confirm that the hacker didn’t open a new account. 

How to protect your credit card from fraud

Protecting your credit card from fraud includes learning online security and other best practices for credit card security. Here are the key steps:

Don’t give out your info

Never give out your credit card information, Social Security Number, or other personal financial details to anyone who contacts you by phone or email. Instead, contact your bank directly with the phone number on the back of your credit card or log in to the bank’s website app by navigating there directly. 

Avoid clicking links in emails asking you to input information like personal details, even if they look legitimate! Of course, reading an informational article linked in an email without logging in won’t jeopardize your security. But one of the most common phishing scams is when scammers impersonate banks or other financial institutions with, in some cases, impressively accurate replicas of their emails. Double-check the sender’s email address to see if it looks legitimate. Better yet, contact the bank directly through your regular channel such as a phone number, website, or app. 

Avoid public WiFi

While everyone uses public Wi-Fi occasionally, avoid any sensitive financial transactions while you’re connected to it. This includes making online purchases that require you to enter your credit card information. If you have to make transactions on public Wi-Fi, use a virtual proxy network (VPN) to protect your information. In addition to Wi-Fi in public places, hotel Wi-Fi can be a hotspot for hackers looking to steal information. Learn more about how hackers can steal your information.

Choose to tap

Most current credit cards and credit card readers allow you to tap the card without inserting it. This helps prevent hackers from trying to manually steal your credit card information when you insert it into a card reader. While rare, this has happened, especially at gas stations.  

Use malware protection 

Installing well-reputed malware protection and scanning software on your computer and phone can prevent viruses from hackers that could steal your sensitive information.

Malware protection software is downloaded directly onto your computer or other device. It will periodically scan your computer to identify, quarantine, and eliminate any malware that hackers can use to access your information or disrupt your computer’s functioning, keeping your systems secure.

Keep your card safe

Store your credit card securely where someone couldn’t easily steal it or take a photo. If you have multiple credit cards, consider keeping some at home and avoid carrying all of them in case your wallet or purse is stolen.

Monitor credit reports and card statements

Finally, habitually check credit card statements each month for any activity you don’t recognize. Checking credit reports regularly can also alert you to any account openings or other unusual activity. 

Final tips to protect yourself from credit card fraud

While data breaches are increasing, the resources available to deal with them are also growing. If you’re a victim of credit card fraud, act quickly to contact your issuing bank to remove the charges and cancel the card number. Then, check your credit reports and freeze your credit if you suspect your information is compromised. 

In addition to the best credit protection practices, you can consider trusted identity theft monitoring software like CreditScoreIQ. MoneyLion’s app helps you track your credit score and notifies you about changes in your credit so you stay on top of your credit and any charges linked to your name. 

Need to boost your credit score? Learn how to help improve your credit score in three months, and get more tips to manage credit cards responsibly!


Who pays for stolen credit card purchases?

You may not be responsible for fraudulent charges if you report your card as lost or stolen and follow the instructions in your bank agreement. The bank usually pays for stolen credit card purchases. Sometimes, the merchant is responsible.

Are you responsible for unauthorized credit card charges?

You are almost never responsible for unauthorized credit card charges. However, you should notify the bank about these charges within 60 days of them appearing on your billing statement.

How do credit card companies investigate fraud?

After receiving a report, credit card companies assess the transactions and gather information. They then reach a conclusion, determining who is responsible. This process is outlined in the terms for the credit card account. 

How much are you liable for a stolen credit card?

According to the FTC, as long as you report any fraudulent charges within 60 days, the maximum you can be liable for is $50. If you report a stolen card before any fraudulent charges are made, your liability drops to $0. 

Do credit card companies investigate fraud?

Yes, credit card companies investigate fraud. They may use advanced tracking and monitoring systems to trace the origin of fraudulent activity by examining transaction patterns, merchant locations, and digital footprints. 

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