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$0 Fraud Liability vs. Dispute Resolution: What’s the difference & why do we care?

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With multiple data breaches, such as the latest from Marriott and Equifax in 2017, identity theft and other fraudulent activity going on, it is important to know how to protect yourself as a cardholder. One way to keep yourself safe is by knowing what added protection benefits are included with your credit cards, and how you can use them, if necessary.

Two very common benefits that come with most credit cards are $0 fraud liability and dispute resolution. Most credit cards offer both protections. At first glance, you might think that $0 fraud liability and dispute resolution are the same, but they are actually quite different.

In this guide, we’ll discuss the differences between $0 fraud liability and dispute resolution, and how to protect yourself from fraud.

$0 fraud liability

It is common for most credit cards to offer some sort of policy that protects cardholders from unauthorized transactions and purchases made with their card. No liability means that the cardholder will not be held responsible for any unauthorized charges, and the cardholder is protected if the card is lost, stolen, or fraudulently used. These protections apply to purchases made in-store, online, via mobile, or by telephone. Most credit card issuers offer $0 fraud liability protection, but don’t worry too much if your credit card lacks $0 fraud liability — legally, your maximum liability for credit card fraud is $50, which is minor compared to debit card fraud that can hold you up to 100% liable if you wait more than 60 days to report an unauthorized transaction.

Here are some examples of issuers offering $0 fraud liability protection on unauthorized charges:

  • American Express
  • Bank of America
  • Barclays
  • Capital One
  • Chase
  • Citibank
  • Discover
  • Wells Fargo

In the event your card is used fraudulently, it is important that that you notify your credit card issuer as soon as possible. The sooner the credit card company is made aware of the situation, the quicker the card can be deactivated — preventing new transactions — and begin an investigation.

The credit card issuer may delay, limit, withhold, or rescind replacement funds if the claim in question includes the following:

  The purchases weren’t posted to the account.

  Gross negligence or fraud is discovered.

  A delay in reporting the fraud.

  Investigation and verification of claim.

Read more about the $0 fraud liability policies from major credit card networks: American ExpressDiscoverMastercard and Visa.

Dispute resolution

If you’ve tried to refund an item you bought with your card that was damaged, misrepresented, that never arrived in the mail or wasn’t what you expected, and the merchant won’t work with you, your card may have you covered. While $0 fraud liability pertains strictly to unauthorized transactions, dispute resolution deals with situations where there is a discrepancy between a buyer and a seller. For example, if you return something to a retail store for a full refund and that refund is denied or never received, then it’s time to file a dispute.

Most credit card companies will work with cardholders to investigate the situation, but only after the cardholder has attempted to mend the situation with the retailer first. Typically, the card issuer will only step in after you have tried to resolve the situation with the seller and were unsuccessful. At that point, the credit card issuer opens an investigation with the merchant. Depending on the outcome of the investigation, if due process did not occur on the side of the merchant, then it would be the merchant’s responsibility to compensate the consumer for their losses.

Dispute resolutions are similar to $0 fraud liability policies because they both protect you from charges you should not be held liable for, but instead of the credit card company being held liable for fraudulent transactions, the merchant is liable. The credit card company works on behalf of the cardholder to try to resolve the matter by investigating which side is at fault.

Read more about dispute resolution policies from major credit card networks such as American Express and Discover. If you have a Visa or Mastercard, contact the bank that issues your card for more information on how to dispute charges.

Why should you care?

While $0 fraud liability and dispute resolution are card benefits you may not use often, they are critical to have when something goes seriously wrong. So, it’s a good idea to familiarize yourself with both benefits so if the time comes when you need to use them, you know what to do.

If you have the cash available to make pricey purchases such as jewelry, furniture, electronics, and other big-ticket items, we recommend resisting the urge to pay in cash and instead charging the purchase to a credit card. Using a credit card will provide more protection benefits than cash such as purchase protection, extended warranty, and dispute resolution. Your credit card’s dispute resolution can come in handy if an item you purchased with your card is damaged, breaks, or you realize was mis-advertised. Had you paid for an item in cash, you would not have the ability to be reimbursed if the merchant refuses to replace the item or reimburse you.

With most issuers, you can file a dispute online or call the number on the back of your card, and some issuers even allow you to dispute a purchase from their mobile app. When you file a dispute, you should have your receipt, date of purchase, amount of the item, and any contact you had with the merchant available.

In addition to providing dispute protection, your credit card’s $0 fraud liability benefit covers you if your credit card information is stolen. With this benefit, you shouldn’t be held responsible for any unauthorized charges made with your credit card. This also covers new accounts that are opened in your name that you didn’t apply for, which can be a big help in cases of identity theft.

Always read the fine print

Take a look at your credit card benefits to get a clear picture of how you are covered if your card is stolen or you need to dispute a purchase. It’s better to know exactly what’s covered before you use one of the protection benefits.

Some exceptions to the rules:

  • If you’re not willing to file a police report on a friend or family member who made unauthorized purchases on your card, you probably shouldn’t file a dispute with your card issuer.
  • Some issuers may reject your dispute claim if you don’t have proof to support your claims, such as receipts, copies emails or photos of a damaged item.
  • The time it takes for an investigation or dispute to be resolved varies and can take up to 90 days.
  • The protections you receive with credit cards and debit cards differ. With debit cards, you’re required to report unauthorized charges within two days and your maximum loss is $50. Before 60 days, you may be held liable for up to $500, and after 60 days, you may have no recourse. As for disputing a debit card purchase, your bank will usually try to work with you, but in the meantime, you’ll be out the cash until the dispute is resolved.

Most importantly, regularly monitor your accounts to make sure you have authorized all of the transactions listed on your bank or card statements. Proactivity is key to catching fraud early and minimizing any damage done to your credit.

Lastly, be sure to monitor your credit report regularly. If you are not already enrolled with a free credit monitoring service like LendingTree, you should consider enrolling.