What's Your Liability With Debit, Credit and Prepaid Cards?

Credit cards have the most-robust fraud protections. Legally, a credit card holder is responsible for no more than $50 in unauthorized purchases, and you’ll have no liability if you report a lost or stolen card before a thief can use it. That said, American Express, Discover, MasterCard and Visa take full responsibility for unauthorized purchases. Plus, under the Fair Credit Billing Act, if you have a billing problem with a merchant, a credit card issuer must investigate and resolve your complaint, and you can withhold payment until then.

Debit cards tied to checking accounts are subject to a different set of rules. Report a missing debit card before unauthorized charges take place and you won’t lose any money. If you report loss or theft within two business days, you’re liable for up to $50. You could lose up to $500 if you report the problem after two days but before 60 days have passed, and you may have unlimited liability thereafter. Even so, many banks will refund any fraudulent charges if you report the problem promptly and the bank has no reason to think you’re falsely reporting fraud. Plus, Visa and MasterCard generally extend their zero-liability protections to signature transactions (as opposed to punching in your PIN) on debit cards with their logos.

Prepaid cards, in general, do not have federal consumer protection against unauthorized transactions, although payroll cards that employers use to disburse wages are subject to the debit card rules. Still, many prepaid card issuers will reimburse you for fraudulent activity as long as you report it quickly. Register your prepaid card to make sure you’re eligible for fraud protection, and look for a card that lists at least a couple months’ worth of your past transactions when you log into your account online. Regularly check your account for suspicious activity.

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