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Your rights in case of fraud

By Martha C. White · Bankrate.com
Tuesday, May 24, 2011
Posted: 1 pm ET

A local newspaper out of California reports yet another instance of thieves stealing credit card numbers by attaching a skimmer -- a device that records credit card data -- to gas pumps. Unsuspecting customers would swipe their credit or debit card, only to have the information recorded so it could be used to commit fraud. It's an uncomfortable fact of our modern, high-tech life: Credit card fraud is on the rise, and these new crooks don't need to access your physical card to commit their crimes. So what can you do to protect yourself?

The first thing is to understand the difference in consumer protection when you use a credit card versus a debit card. "The credit card rules on both liability and on timing are much better for consumers," says Kathleen Keest, senior policy counsel for the Center for Responsible Lending. According to Keest, your liability is limited by law to $50; in practice, though, most card issuers offer customers zero-liability fraud protection. 

In the case of debit cards, the rules differ depending on whether a thief has stolen your actual card or just the data, and whether they've made unauthorized purchases. If someone steals your physical card or makes purchases with fraudulently obtained debit card information, you have two days after you notice the fraudulent activity to notify your bank for your liability to be $50. If you wait longer than two business days, your liability could be as high as $500; if you wait longer than 60 days, your potential liability could be unlimited.

If thieves just steal your debit card data -- which is what happens when someone attaches a skimmer to a card reader -- but haven't made any fraudulent transactions yet, your protections are a bit better. If you notify the bank of the suspected data theft within 60 days, you'll have zero liability. If you wait until after 60 days, though, your potential liability could be unlimited. The National Consumer Law Center says that Visa and MasterCard have zero-liability policies of their own, but this protection doesn't cover all types of theft. 

The other reason credit cards offer greater protection is that while the issuer is undergoing their investigation, you're not responsible for those charges (you'll still have to pay your bill on time for what you charged, though). With debit cards, the bank generally makes you wait until they've finished their investigation to return the money to your account. Keest says banks have to complete this investigation within 10 days; if more time is needed, they can take up to 45 days but they have to return the disputed amount (less $50) to your account in the meantime. 

How do you protect yourself? The easiest way is to monitor your account activity online regularly and contact the issuer immediately if you see any charges you didn't make. If your data is compromised and your identity stolen, this 12-step guide tells you how to go about it.

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