Your Liability for Unauthorized Credit and Debit Card Charges

The theft or loss of a credit card, debit card, or ATM card can happen to anyone—and you need to be prepared to take action, protect your rights, and stop thieves in their tracks.

If your ATM, debit, or credit card is lost or stolen, don't panic. Federal laws and bank policies limit your liability for unauthorized charges. But it's important to notify the bank or card issuer of the loss or theft as soon as you discover it.

Laws That Cover Stolen and Lost Cards

The two primary federal laws covering procedures after card theft or loss are the Fair Credit Billing Act and the Electronic Fund Transfer Act.

Reporting a Credit Card as Stolen or Lost

Under the Fair Credit Billing Act, your liability for unauthorized charges depends on whether the thief personally presented your card to make the purchase or just stole the number.

• If the thief personally presents your card to make the purchase, the card issuer can't hold you liable for more than $50 in fraudulent charges. (12 C.F.R. § 1026.12). Many card issuers waive this $50.
• You have no liability if the thief stole the number, but not the card.

However, in either of the above situations, it's important to notify the card issuer as soon as you know of the theft.

To dispute unauthorized charges, send a letter to the credit card company at the address given for this purpose, not the address for sending your payments. Include your name, address, account number, and a description of the billing error. You may use the Federal Trade Commission's sample letter. Send your letter so that it reaches the creditor within 60 days after the first bill showing the unauthorized charge. (12 C.F.R. § 1026.13).

Or you can file your dispute online or through a mobile banking app. (But you generally get more legal protections with a letter, so it's best to follow up with a written notification.)

After you report your card as stolen or lost, the issuer will suspend the card and send you a new one. This closing of the account is different from canceling or permanently closing a credit card, which can cause problems with your credit reports. The issuer will also credit back any fraudulent charges made to your account, although you can expect them to conduct a fraud investigation.

Reporting a Debit Card or ATM Card as Stolen or Lost

With ATM or debit cards, you must act quickly 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 before any unauthorized charges are made.
• 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. (15 U.S. Code § 1693g).

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

Note that if the theft involved only your ATM or debit card number—and not the card—you're not liable for unauthorized transactions if you report them within 60 days after your statement is sent to you. It's important to review your statements. So, open your monthly statements promptly and compare them to your receipts.

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.

How to Protect Your Cards and Information

Know where your credit, debit, and ATM cards are, and make sure they're secure. Here are some more tips for using and protecting your cards.

Tips for Using and Protecting Your Credit Card

• Check your statements. Regularly review your account activity either online or on a mobile app.
• Enable mobile alerts for purchases or suspicious activity. Some credit and debit card issuers also provide free fraud monitoring alerts via text, phone, or email.
• Exercise caution in giving out your credit card account number over the phone. Don't give out the card number unless you initiate the call.
• Don't leave blanks on charge slips; draw a line across any blanks.
• Always take your receipts, and keep them until you reconcile your bill.
• Cut up or shred your old cards.
• Review your credit reports to look for new accounts under your name that you didn't open.
• Carry only the cards you think you'll need.
• Make and keep a record of your card information, listing the issuer's customer service number, and keep this in a safe place.
• Ignore anyone contacting you to "verify" your account information by phone or email. The call or message could be a phishing scam designed to steal your account information.

Tips for Using and Protecting Your Debit and ATM Cards

• Review your statements.
• Always take your receipts; don't throw them away in a trash can near the ATM.
• Protect your PIN. Never leave this information out in the open or written down in an easy-to-spot location. Don't keep a copy of your PIN with you or the card.
• Don't base PINs on common personal information, like your address, family birth dates, or pets' names—those are easy for a thief to figure out.
• Cut up or shred your old cards.
• Record your transactions, and reconcile your monthly statement promptly.
• You should also periodically check your account activity, especially if you use online banking. Compare the transactions to those you've recorded and report any discrepancies to your bank right away.

Learn More

The Federal Trade Commission website is a useful resource for information on consumer protection laws and issues related to credit, debit, and ATM cards and their use. If you have an issue with your credit card issuer or bank, you may submit a complaint to the Consumer Financial Protection Bureau (CFPB). The CFPB will forward your complaint to the company and work to get you a response.

For more information on finances, debts, and how to regain financial health, get Solve Your Money Troubles: Debt, Credit & Bankruptcy, by Amy Loftsgordon and Cara O'Neill (Nolo).