What Is Zero Fraud Liability? How to Protect Yourself From Fraudulent Credit Card Purchases

One of the MAJOR reasons it can be beneficial to you to use a credit card over a debit card (or even cash) is having a credit card with zero fraud liability. This protection is basically the credit card company putting their legal weight behind you to make sure not a dollar of your money is wasted to hackers, identity thieves, or other malicious tricksters. 

Zero fraud liability, also called fraud liability protection, means a cardholder is not liable for unauthorized transactions on their accounts. 

With the rise of data leaks and cybercrime, anyone can quickly find themselves in hot water, especially with fraudulent credit card purchases. 

Zero fraud liability is a credit card issuer policy that absolves you of responsibility for any fraudulent transactions on your account — if you report them in time.

I wanted to take a deep dive into why credit card issuers don’t hold consumers responsible for paying back money stolen or lost due to fraudulent card purchases. So I did plenty of research and found that credit card companies are looking out for us and it’s actually a major perk of owning one. 

Credit card issuers offer fraud liability protection to safeguard cardholders from fraud or theft, but you still may have to do a little bit of work. In this article, I’ll cover what zero fraud liability entails, its benefits, and its limitations. 

Dealing with fraud is a nuisance, and I can’t imagine how much more of a frustrating experience it would be without fraud protection. Zero fraud liability is a type of credit card perk that brings peace of mind to a situation that could be unnerving. 

Reporting Fraudulent Transactions

If you’ve ever dealt with fraudulent transactions, you know there are a few steps before you find a resolution. You may need to verify your transactions, report the suspicious ones, and alert your bank so it can take care of the rest. 

In the past, when I experienced debit card fraud, my bank alerted me before I even realized the transaction hit my account. But if that doesn’t happen and you spot the issue yourself, you may need to be a little more proactive. 

Although the process can vary by issuer, you can always start with contacting customer service by phone.

The Federal Trade Commission also recommends cardholders to send a letter to their bank or credit card issuers to create a paper trail to prove you reported the issue.  

And you probably don’t need to worry whether your issuer offers fraud protection. All four major credit card issuers, Visa, Discover, Mastercard, and American Express, include fraud liability protection. 

Reporting Time Frame

Check your account statements regularly so you can spot suspicious activity quickly. Issuers usually give you a time frame to report fraud and avoid liability.

I recommend checking in on your finances daily and reporting your charges within two business days to avoid liability. Delays in reporting can sometimes lead to partial liability, depending on the issuer’s policy. 

Thankfully, as I mentioned above, banks and credit card issuers often alert you of suspicious charges made on your account. Their complimentary fraud monitoring can immediately notify you via phone, text, or email alerts. 

So make sure to enable those trusty alerts to get real-time updates and not miss unauthorized charges. 

Issuer’s Investigation Process

Once you report the fraud, the issuer will investigate the activity. You may need to provide additional information or documentation. 

Depending on the scale of the fraud, some investigations may even involve contacting law enforcement and filing a police report. The bank or credit card company will examine your claim and determine if fraud occurred.

During the investigation, the issuer may offer a temporary credit within a few days. Once the investigation is over, it will either remove or cancel the fraudulent charges and restore your funds. 

About 60% of U.S. credit cardholders have been victims of fraud. In fact, 52 million Americans had fraudulent purchases charged to their credit or debit cards in 2023. I find those numbers eye-opening, and they certainly prove that fraud protection is necessary. 

Financial Protection

Financial protection is essential with so much technology floating around. I know many people who have seen at least one fraudulent charge on their debit or credit cards. With how common fraud is, we all risk having that experience. 

Zero fraud liability shields cardholders from financial loss due to unauthorized transactions. It covers not only the principal amount but also interest, additional fees, and penalties associated with the charge. This way, fraudulent activity also won’t impact your credit history.

Unlike debit cards, credit cards are required under federal law to cover any costs associated with fraudulent transactions and activity. That means credit cards offer better fraud protection than debit cards, helping you keep the money that is rightfully yours. 

Peace of Mind

Imagine having to pay for something you never bought. Not a great feeling, huh? Unfortunately, that’s what credit card fraudsters try to make people do every day. 

Hackers use different tactics, including stealing your data online, email phishing, and even putting card skimmers on gas pumps to get your information. That’s why you should remain vigilant — because you never know when a breach may happen.

But thanks to fraud liability protection, we can worry about those scenarios a little less. You’ll know that even if an issue arises, as long as you report it quickly, you aren’t liable for the charges. 

Incentive for Card Use

We all love incentives, and credit cards offer several advantages. Not only do they offer fraud protection, but they also provide rewards and other exclusive benefits to encourage people to use their credit cards. 

Since credit cards have better fraud protection than debit cards, charging purchases more frequently could help you protect your finances. For example, if a hacker skims your credit card — using a skimming machine to steal your information during a purchase — credit card issuers can resolve the incident quickly.

Credit cards aren’t directly linked to your bank account like debit cards. So when a fraudulent transaction appears, cardholders may only lose access to their credit line as they wait for a new card to arrive instead of all the money in their checking account. 

Credit cards also come with plenty of other benefits. One of my credit cards offers a few different cash back categories. So when I know I’m going to make multiple purchases within a certain category, I use that card to get more cash back rewards. 

Of course, you can also earn travel miles and points for free or discounted flights and hotels. Some cards even offer travel insurance if you use them to fund your trip. 

Sometimes, a charge may pop up on your credit card statement that is not authorized, but also not fraudulent. Although rare, these cases can happen like in the case of a toddler I saw on social media who ordered several items from Amazon. His mom wasn’t happy. 

Prompt Reporting Requirement

Prompt reporting is key to zero fraud liability. If you wait too long, you can fail to take advantage of the full protection and become either partially or entirely liable depending on the issuer’s policy. 

You can prevent partial or full liability by reporting suspicious activity within the time frame set out in your cardholder agreement. Just remember, if you report the issue and cancel the card within two business days, you should be in the clear. 

Typical Scope of Coverage

Unfortunately, not all unauthorized activity is covered. You need to understand the scope of your coverage so you can identify unauthorized transactions covered under fraud liability protection. 

Most unauthorized transactions are included in zero fraud liability coverage. But exclusions may apply if someone you know uses your card, including:

• a family member
• an employee
• a friend

If you don’t have a good credit standing, i.e. you haven’t paid your bill on time, you may not receive the same level of protection. So keep your account current to get the most out of your protection. 

Taking reasonable care of your credit card can also go a long way. Get into the habit of looking out for your credit card information.

I use the contactless payment functions on my credit card and mobile device to help prevent hackers from stealing my information through skimming or signal stealing. 

Issuer Policy Differences 

It is important to call customer service or check your issuer’s website to find its terms and conditions for fraud liability protection. Credit card companies have different policies and methods for investigating fraud, so going straight to the source can help you take the right steps when reporting fraud. 

I’ve already mentioned that the top four credit card issuers offer fraud liability protection policies. But let’s take a look at the details and compare their coverage limits and reporting time frames. 

• Visa guarantees its users won’t be held responsible for unauthorized charges. Cardholders should notify Visa immediately of the fraudulent charge. Once reported, Visa will replace funds taken from your account within five business days. 
  • What to expect: Replacement funds are issued on a provisional basis, but may reverse course if it finds gross negligence, delay in reporting the fraud, or finds you lack account standing. You can contact Visa directly for more details. 
• Discover protects all cardholders with its zero fraud liability policy. It also takes steps to proactively safeguard users. Discover monitors suspicious activity and sends users alerts so they can verify purchases. That way, you can stay on top of unauthorized transactions and more easily report them. If you find suspicious transactions, contact Discover’s customer support right away.
  • What to expect: Discover will immediately close your account and ask you to destroy your cards. It will also remove the unauthorized purchases from your account pending the outcome of the investigation. Some transactions don’t fall under Discover’s policy, including those made by family members, friends, or other users you authorized to use your card. Basically, if I trusted someone else with my credit card, and they made bad financial decisions, I own the loss, not Discover.
• Mastercard offers fraud liability protection in most cases.
  • What to expect: You must meet certain conditions to receive coverage, including doing your best to protect your credit card from fraud or theft and promptly reporting loss or theft. Mastercard recommends users contact customer service for more information. 
• American Express won’t hold users responsible for unauthorized transactions or credit card loss. Its terms are straightforward: As long as you took reasonable care to protect your account details and card, you are safe. American Express also notifies cardholders of suspicious activity via alerts, so they can verify transactions and report any shady ones.
  • What to expect: Users should contact American Express immediately if they see suspicious activity. Even some cases of family members using your card or account details are covered by American Express. If you can produce an affidavit, a declaration, and/or a copy of an official police report, American Express will work with you to resolve your fraud case. But American Express can’t guarantee a pleasant Thanksgiving if you have one of your relatives arrested for credit card fraud.

Each credit issuer has different policies and procedures, so review the details carefully so you know what you do in case you suspect fraudulent card activity.

I am relieved that my credit card has fraud liability protection, but I also know that the policy doesn’t mean I can turn a blind eye to my monthly statements. As long as I check in on my account, set alerts for purchases, and report suspicious activity ASAP, I’m covered.

Credit card issuers don’t want to hold you accountable for fraud, they want you to shop confidently and use your credit card more. And when you combine zero fraud liability with rewards and other perks, it’s easy to see why a good credit card can be a valuable resource to keep in your wallet.