zero liabilityThese days, there are so many ways your credit card information can get stolen. In addition to old-fashioned card theft (when someone steals the physical card), you could get your credit card data harvested by a skimmer or shim, get tricked into giving your details to a phishing scam or have your card number leak in a massive data breach. With card fraud growing each year, credit card providers have a lot of incentive to help you protect yourself from unauthorized purchases, and one of the major ways they do that is with zero liability protection. Read on to find out zero liability’s perks and limitations so you can take full advantage of this helpful feature.

Legal protection

Zero liability is a great benefit, but before we dig into it, it’s important for you to know your legal rights for dealing with fraudulent charges. Credit cards are such a safe way to pay thanks in part to the Fair Credit Billing Act, which is a federal regulation that limits your financial liability if your card or card number get stolen. If someone steals your credit card and makes purchases with it, the maximum amount you can owe on those purchases is $50. In cases where you report your credit card as stolen before any unauthorized purchases are made or only your card information is stolen, you aren’t responsible for any illicit charges.

There are related legal rights for debit cards as well provided by the Electronic Fund Transfer Act, though they’re not nearly as comprehensive as the credit card protections. Debit cards have a similar $50 liability limit for unauthorized purchases (which goes down to no liability if you report your card as stolen before any fraudulent purchases occur), but you have to report any theft within two business days of discovering it or your liability increases to a much larger $500. If you fail to report the theft within 60 days of receiving the bank statement that lists the fraudulent purchase, your liability then increases again to cover all of the money charged to your bank accounts.

Zero liability protection

While the Fair Credit Billing Act provides a baseline of safety from unauthorized purchases, zero liability extends that credit card fraud protection even further by dropping the maximum amount of money for which you are responsible from $50 to $0. That means if your credit card is stolen and used without your permission, you won’t have to pay a dime of the fraudulent charges. Many credit card issuers and networks, including American Express (a NextAdvisor Advertiser), Barclaycard, Capital One, Chase, Citi (a NextAdvisor Advertiser), Discover, Mastercard, U.S. Bank, Visa and Wells Fargo, offer zero liability to give you peace of mind, simplify the fraud resolution process and show you they really care about your account security.

If you’re looking at a credit card with zero liability protection, keep in mind that not all zero liability policies work the same way. Some benefits, such as the one for U.S. Bank, require you to notify your credit card issuer promptly once you discover fraud. Others, like Mastercard’s, stipulate that you must take reasonable care in protecting your card from loss or theft, so if you do something reckless like give your credit card to a stranger or post photos of your card’s front and back onto social media, that may void the benefit. Read your card provider’s specific zero liability policy before you make any assumptions regarding how it works. Also, remember that if your credit card provider decides you don’t qualify for zero liability, you’re still protected by the Fair Credit Billing Act.

How to take advantage of zero liability

Credit card issuers are generally pretty good at detecting and stopping fraud, but there are a few things you can do to catch suspicious activity yourself so you can be sure your zero liability protection is as effective as possible.

Take care of your information: Be very careful with your credit card information, especially when giving it to people through email or over the phone. Phishing scams have evolved to the point where they can fool even fairly tech-savvy consumers. You should also be aware of what you throw away, since dumpster diving identity thieves can glean a lot of personal information from discarded paperwork.

Check your statements: Regularly checking your credit card statements is one of the best things you can do for your financial health, partly because it lets you catch unauthorized activity quickly. When you notice a charge on your card statement that you don’t remember making, report it to your card issuer immediately so it can look into the matter. Many credit card providers have phone lines staffed around the clock to handle fraud cases.

Set up alerts: At this point, it’s very common for credit card issuers to let you set up spending alerts using your online account, sending you a text or email every time a transaction above a certain dollar amount that you specify appears on your card. You should heavily consider doing this, as alerts can clue you into unauthorized purchases right after they happen.

Zero liability can do a lot to help you with unauthorized credit card use, but be aware that there are other types of identity theft, like medical identity theft and tax identity theft, that you still may be vulnerable to. If you’re concerned, you may want to look into signing up for an identity theft protection plan or credit monitoring service, particularly if you have children.

To learn more about how credit cards protect your payments from criminals, follow our credit cards blog.