Your Liability for Unauthorized Credit and Debit Card Charges

Learn how to limit your liability for unauthorized credit or debit card charges.

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If you lose your ATM, debit, or credit card, don't panic. Federal laws and bank policies limit your liability for unauthorized charges. However, it's important to notify the bank or card issuer of the loss or theft as soon as you discover it. Read below to learn about your notification duties and maximum liability for each type of card.

Credit Cards

Your liability for unauthorized charges depends on whether the thief personally presented your card to make the purchase, or made the purchase over the Internet or by phone.

  • If the thief personally presents your card to make the purchase, the card issuer cannot hold you liable for more than $50 in fraudulent charges. Many card issuers waive this $50. 
  • If the thief uses your card by phone or the Internet, you have no liability. 

In either of the above situations, however, it's important to notify the card issuer as soon as you know of the theft. If you wait, the creditor may not believe that the card was really lost or stolen.

ATM and Debit Cards

With ATM or debit cards, you must act quickly in order to avoid full liability for unauthorized charges when your card is lost or stolen. Under the federal Electronic Fund Transfer Act, your liability is:

  • $0 if you report the loss or theft of the card immediately and the card has not been used
  • up to $50 if you notify the bank within two business days after you realize the card is missing
  • up to $500 if you fail to notify the bank within two business days after you realize the card is missing, but do notify the bank within 60 days after your bank statement is mailed to you listing the unauthorized withdrawals, or
  • unlimited if you fail to notify the bank within 60 days after your bank statement is mailed to you listing the unauthorized withdrawals.

If you can convince the bank that your notification failure was due to extentuating circumstances, it must extend the notification timeline for a "reasonable period." 

How to provide notice. Provide the notice in writing. For purposes of meeting the time requirements, the law considers written notice to have been given when you deposit it in the mail or deliver it personally to the bank. The timelines for giving notice are generally extended if your delay in giving notice was caused by extenuating circumstances such as extended travel or hospitalization.

The bank's duty. If the bank claims that you are liable for amounts over $50, it must show that the additional loss would not have occurred if you had given timely notice of the card's loss or theft.

Voluntary Caps on Liability for Debit Card Charges

In response to consumer complaints about the possibility of unlimited liability, some card issuers cap the liability on debit cards at $50. And some banks don't charge anything if unauthorized withdrawals appear on your statement. Also, some states have capped the liability for unauthorized withdrawals on an ATM or debit card at $50.

For more information on finances, debts, and how to regain financial health, read Solve Your Money Troubles: Debt, Credit & Bankruptcy, by Margaret Reiter and Robin Leonard (Nolo).

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