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Term: Zero Liability Policy

13 Jan 2015

A condition in a credit card agreement stating that the card holder is not responsible for unauthorized charges. The zero-liability policy that all major credit card issuers provide to all card holders means that any fraudulent charges that you report or that the credit card issuer detects will be removed from your account and you will not have to pay for them.

As a credit card holder, a number of scenarios could cause fraudulent charges to show up on your account. Hackers could access the database of a company that has your credit card information, and they could use or sell that information, resulting in purchases you did not authorize. A criminal could tamper with a credit card swiping device at a store so that when you swipe your card, your information is stolen and used to make fraudulent transactions. You could accidentally turn over your credit card details in a phishing scam, enabling a criminal to make purchases on your card.

In these situations and others where your card is lost or stolen, you will have zero liability for any charges you didn’t initiate and approve as long as you meet your obligations. These include notifying your credit card issuer as soon as you notice any fraudulent transactions and exercising reasonable care in protecting your card from loss or theft. The zero liability policy applies regardless of how the fraudulent transaction was conducted; you won’t be responsible for unauthorized transactions made in person, by phone, online or through a mobile application.

Credit card issuers offer zero liability policies because without them, it would be too risky for a consumer to have a credit card. Consumers don’t want to risk being on the hook for hundreds, thousands or even tens of thousands of dollars in fraudulent charges if their credit card information is stolen. Zero liability policies have some exceptions, though; they may not apply to all commercial credit card transactions, for example, or to all foreign transactions. Contact your card issuer if you have any questions about your card’s zero liability policy.

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