What Does Credit Card Zero-Liability Protection Do?

Imagine a notification pops up on your phone — an alert from your credit card app with transaction details you don’t recognize. Chances are, it’s an unauthorized transaction, otherwise known as credit card fraud. 

While dealing with credit card fraud can be stressful, you don’t need to panic about being on the hook for unauthorized transactions. Most credit card issuers offer zero-liability protection benefits, so you don’t have to pay for unauthorized charges.

Read this guide to understand zero-liability protection, your rights as a cardholder, and what you can do to stay clear when you’re a victim of credit card fraud.

What Is Zero-Liability Protection?

Many credit card issuers offer zero-liability protection as a cardholder benefit. With zero-liability protection, cardholders aren’t held responsible for unauthorized charges on their accounts. This feature enhances credit card security and offers peace of mind if you’re concerned about credit card fraud.

With zero-liability protection, you don’t have to pay for fraudulent charges if your credit card is lost, stolen, or used without your permission. The credit card issuer investigates and covers the cost of unauthorized charges.

Zero-liability protection is a standard feature for most credit cards. Although you might take it for granted as a common benefit, it’s a key protection when credit card theft can easily disrupt your financial life.

However, while zero-liability protection can significantly protect your credit card account, cardholders still have responsibilities such as timely reporting. Even with zero-liability protection, it’s a good idea to safeguard your credit card account and monitor for fraudulent charges.

Cardholder Rights

Zero liability for unauthorized charges is a nice benefit, but all credit cards have limited fraud liability under the Fair Credit Billing Act. 

FCBA rules that protect cardholders limit your responsibility to a maximum of $50 if you report your card’s loss after someone uses it. You aren’t responsible for any unauthorized charges if you report the loss before it’s used. And if your account number is used but your card isn’t lost or stolen, you’re not responsible for charges.

How Zero-Liability Protection Works

Credit card issuers use advanced fraud detection methods with algorithms and monitoring systems to detect unusual activity on your account. Your account is constantly analyzed for transaction patterns to identify potential fraud. For example, your account might be flagged for potential fraud if there’s a purchase outside of your usual spending patterns, such as a large purchase in a foreign country.

If a purchase is flagged as potential fraud, the credit card issuer contacts you to confirm the charge. If it’s unauthorized, the issuer will decline the charge, freeze your account, and reissue your credit card. With zero-liability protection, you won’t be held responsible for unauthorized charges, even if some slipped through before the fraud alert came in.

In addition to fraud detection, cardholders can monitor accounts to spot unauthorized charges. You should review your charges at least once a month and promptly report charges you don’t recognize. Most issuers require timely reporting of unauthorized transactions, usually within 60 days of the transaction appearing on your statement. The sooner you report fraud, the quicker the issuer can take action.

If you report fraud, the issuer investigates the charges. Usually, the disputed charge is removed from your account temporarily during the investigation. The issuer verifies whether the transaction was unauthorized by checking where and how the card was used and comparing it to your typical spending patterns. You may need to provide more information or documentation to support your claim.

What’s Not Covered by Zero-Liability Protection

Some transactions aren’t covered by zero-liability protection. For example, if you authorize a transaction but then change your mind, it’s still an authorized transaction, and you’d need to dispute it. Or if an authorized user makes a purchase you didn’t agree with, that’s still an authorized transaction you’re responsible for. 

Business credit cards may have different liability policies and may not offer the same level of zero-liability protection as consumer credit cards.

Issuers typically expect timely reporting, and you’re generally expected to report fraud within 60 days of receiving a statement to avoid responsibility for the charges. You may also face issues if the issuer discovers you were negligent with your card information (for example, if you share your credit card with a friend or relative who makes purchases).

Zero-Liability Protection Policies by Credit Card Issuer

While all zero-liability protection policies offer largely the same thing — no liability for unauthorized charges — there are nuances from issuer to issuer. Here’s what you need to know about the zero-liability protection policies from major credit card issuers:

• American Express: Under the American Express Fraud Protection Guarantee, you won’t be held responsible for fraudulent charges — online or offline — if you’ve reasonably protected your account details, PIN, and devices with your account information. You must notify American Express immediately if your card or eligible device is lost or stolen or if you suspect it’s being used without your permission. 
• Bank of America: With Bank of America’s $0 Liability Guarantee, you’re not responsible for fraudulent transactions made on a Bank of America credit or debit card as long as you report them promptly.
• Capital One: With Capital One’s $0 Fraud Liability, you’re not responsible for unauthorized charges if your card is lost or stolen.
• Chase: Chase offers Zero Liability Protection, which means you’re not responsible for unauthorized charges to your account. You must call the number on the back of your card to report unauthorized charges.
• Citi: With select Citi cards, you’re protected against fraud with $0 liability on unauthorized charges that weren’t made by you or another authorized user of the account. 
• Discover: Discover’s $0 Fraud Liability Guarantee means you won’t be responsible for unauthorized purchases on your account. The issuer encourages cardholders not to share card information with employees, relatives, or friends.
• Wells Fargo: Wells Fargo credit cards offer zero-liability protection, so you’re not responsible for unauthorized transactions as long as you report them promptly.

What Cardholders Need to Know About Zero-Liability Protection

While zero-liability protection offers peace of mind, it’s not a free pass to ignore account activity. You should take care with your account information, monitoring, and reporting. 

Understand best practices for account security, monitoring transactions, and reporting fraud. As some issuers require cardholders to practice responsibility to qualify for zero-liability protection, following these practices can help you take full advantage of your benefit:

• Respond to Fraud Alerts: Credit card issuers use advanced fraud detection technology, and these days, you’re more likely to have a credit card issuer alert you to fraud than the other way around. Be cooperative and respond to alerts from your credit card issuer, confirming or denying authorization for any transactions flagged as suspicious.
• Pay Securely: Use secure payment methods, including secure websites with a padlock in the address bar. Avoid completing transactions on unsecured networks such as public Wi-Fi, where your information might be exposed.
• Protect Your Card Information: Avoid sharing your card information directly whenever possible, especially over the phone, and never with an untrusted merchant. Be careful about sharing your card information with friends and family. It’s best to avoid doing so, as transactions typically aren’t considered unauthorized if you voluntarily share your card details and would be ineligible for dispute.
• Routinely Change Passwords: Although fraudsters are more likely to access your credit card information than your online account, securing your credit card credentials is still important. Regularly update your online account passwords and use strong passwords with letters, numbers, and special characters. Adding another layer of security, such as multifactor authentication (MFA), can make it more difficult for hackers to get in.
• Shred Personal Documents: Sensitive information such as old credit card statements should be shredded or avoided entirely with online statements.
• Watch Out for Phishing Scams: Thieves may pose as your financial institution or trusted merchants to trick you into providing card details. You shouldn’t share your card information with anyone who emails or calls you first. Instead, avoid clicking links and go to the official website or call the number on the back of your card to be sure you’re dealing with who you think you are.
• Frequently Monitor Your Account: Check your credit card account at least monthly. For example, you should review your statement and transactions each time you log in to pay your bill. However, it’s easier to catch fraud before it gets out of hand if you check your account more frequently.
• Set Up Transaction Alerts: Most credit card issuers make it easy to set up email, text, or app transaction alerts so you can get real-time notifications about transactions on your card. You can use these notifications to spot transactions you didn’t authorize and report them immediately.
• Report Fraud Right Away: When you notice a suspicious charge, contact your credit card issuer. 

What To Do if You Spot Unauthorized Credit Card Transactions

Credit card fraud can still slip through even with the best protection efforts. If you discover unauthorized transactions on your account, acting quickly can minimize damage. Take these steps as soon as you see a questionable charge come through:

• Investigate All Unexpected Charges: If you see a charge you don’t recognize, give it some attention. It might be legitimate, like an LLC that doesn’t match the merchant name you’re more familiar with or a parking or vending machine transaction that slipped your mind. When in doubt, do a quick online search for the merchant’s name or look for a receipt to confirm the purchase. Remember that thieves may use small test charges to ensure your card works and then make more significant purchases if those charges go through, so acting quickly to investigate charges can protect your account from further damage.
• Contact Your Credit Card Issuer Immediately: Credit card issuers typically have 24/7 fraud lines and options to report fraud online or in an app. That way, you can report unauthorized charges as soon as you spot them and stay covered under zero-liability protection. It’s best to make the report right away, but if you can’t, you should log in to your online account to lock your card so any additional charges are declined. That can limit the damage until you can talk to the credit card issuer.
• Expect a New Card and Temporary Credit: As soon as you report fraud, your credit card issuer will shut down your card and issue you a new one. You can ask about expedited delivery if you need to use your card again soon. As the issuer investigates the unauthorized charges, you should see a temporary credit applied to your account. The charges should be removed permanently once the issuer confirms they were fraudulent. 
• Follow Up: You can expect credit card issuers to take the lead on fraud investigations, but you can always get in touch if you want to know the status and haven’t gotten an update. If the facts are clear, you might see your investigation clear within a few days, though it can take up to 90 days, particularly for cases with large transaction amounts or international fraud.

Although reporting and resolving credit card fraud is usually straightforward, mistakes can occur. 

One of the biggest mistakes is neglecting to review your credit card transactions, whether it’s regularly checking your online account or monthly statement. This is a problem because fraudulent transactions tend to cluster. Although issuers are increasingly adept at catching fraudulent transactions before they multiply, charges can fly under the radar. If the issuer doesn’t catch fraud and you’re not checking, you might be unaware as you pay for unauthorized transactions.

Another mistake is waiting to report fraud. This is especially serious because it may affect your eligibility for zero-liability protection. Most credit card issuers require you to report unauthorized transactions within 60 days of your statement with the transaction. The sooner you report fraudulent transactions, the faster the credit card issuer can deal with the fraud and protect your account.

While credit card issuers have advanced fraud investigation departments that you can expect to stay on top of your investigation, keeping notes is a good idea. Save communications such as notices and letters about the investigation, and document any phone calls or chats you make with the issuer about fraud. These can be useful if there’s a delay or any other issue with the investigation, as you can provide details to support your claim.

Final Thoughts

Credit card zero-liability protection can offer peace of mind when credit card fraud is rampant. It can defend you against unauthorized charges, ensuring you won’t be held responsible if fraud hits your credit card account. Still, cardholders have a responsibility to keep accounts secure and report fraud as soon as possible. As each credit card issuer’s zero-liability protection policy is unique, you should review the terms of your credit card agreement to be clear on what’s expected of you as a cardholder.