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The theft or loss of a credit card, debit card, ATM, or prepaid card can happen to anyone. You need to be prepared to take action, protect your rights, and stop thieves in their tracks. If your credit card, debit card, ATM, or prepaid card is lost or stolen, don't panic. Federal laws and bank policies limit your liability for unauthorized charges. But it's important to notify the bank or card issuer of the loss or theft as soon as you discover it.
The two primary federal laws covering procedures after card theft or loss are the Fair Credit Billing Act and the Electronic Fund Transfer Act.
Under the Fair Credit Billing Act, your liability for unauthorized charges depends on whether the thief personally presented your card to make the purchase or just stole the number.
However, in either of the above situations, it's important to notify the card issuer as soon as you know of the theft.
To dispute unauthorized charges, send a letter to the credit card company at the address given for this purpose, not the address for sending your payments. Include your name, address, account number, and a description of the billing error. You may use the Federal Trade Commission's sample letter. Send your letter so that it reaches the creditor within 60 days after the first bill showing the unauthorized charge. (12 C.F.R. § 1026.13).
Or you can file your dispute online or through a mobile banking app. (But you generally get more legal protections with a letter, so it's best to follow up with a written notification.)
After you report your card as stolen or lost, the issuer will suspend the card and send you a new one. This closing of the account is different from canceling or permanently closing a credit card, which can cause problems with your credit reports. The issuer will also credit back any fraudulent charges made to your account, although you can expect them to conduct a fraud investigation.
Report the Loss Immediately
As soon as you discover the theft or loss of your card, you should report it to the card issuer or bank. Almost all companies have 24-hour service numbers and loss departments to handle these emergencies.
Let the representative know right away that your card was stolen or lost. Report when you realized the card went missing. The customer service representative might ask for details and confirm whether you made certain recent transactions.
Timing is critical: the sooner you call, the less likely it will cost you any money. Your protection against unauthorized charges depends on the card type and when you report the loss.
With ATM or debit cards, you must act quickly to avoid full liability for unauthorized charges when your card is lost or stolen. Under the federal Electronic Fund Transfer Act, your liability is:
If you can convince the bank that your notification failure was due to extenuating circumstances, it must extend the notification timeline for a "reasonable period."
Note that if the theft involved only your ATM or debit card number—and not the card—you're not liable for unauthorized transactions if you report them within 60 days after your statement is sent to you. So, it's important to review your statements promptly.
In response to consumer complaints about the possibility of unlimited liability, some card issuers cap the liability on debit cards at $50. And some banks don't charge anything if unauthorized withdrawals appear on your statement.
Also, some states have capped the liability for unauthorized withdrawals on an ATM or debit card at $50.
With a prepaid card, you spend money that someone (for example, you, your employer, or the government) has already placed in a prepaid card account. Money is loaded onto the card with direct deposit, checks, or cash. You may then use that card to, for example, pay for goods or services, withdraw cash from ATMs, or pay other costs.
Prepaid cards often have high fees, like monthly fees, activation fees, fees to get cash, customer service fees, reloading fees, bill payment fees, ATM withdrawal fees, overdraft fees, and more. And in the past, most cards didn't protect you if you lost the card or if you needed to dispute an item or service you bought with it. (Credit cards, on the other hand, and to a lesser degree, debit cards, have provided protections in these areas for many years.)
However, on April 1, 2019, the Prepaid Accounts Rule went into effect. This rule provides protections if you lose the card or it gets stolen.
What Is the Difference Between a Prepaid Card and a Credit Card?
Prepaid cards look a lot like credit cards. They're generally the same shape and size and are typically associated with a bank or credit card name brand, like American Express, Visa, or MasterCard.
But when you use a prepaid card, you're using money that's already deposited into the account. With a credit card, you borrow money each time you make a charge and you have to pay it off later.
The rule requires specific upfront disclosures for prepaid cards, limits a consumer's liability if a card is lost or stolen, and generally makes prepaid cards a safer product for consumers.
The Prepaid Accounts Rule, sometimes called the "Prepaid Cards Rule," applies to different types of prepaid cards, such as prepaid debit cards, digital wallets, peer-to-peer transfer apps that hold balances (like Paypal or Venmo), some payroll cards, tax refund cards, and certain government benefit cards.
However, other kinds of cards, such as gift cards usable only at a particular store or group of stores , disaster-relief cards, parking reimbursement cards, and health-related cards, aren't affected by the rule.
Under the Prepaid Accounts Rule, the financial institution issuing the card must give you specific disclosures before you get a prepaid card. For example, the institution must disclose:
Once you register the card in your name, the rule also limits your liability when a card is lost or stolen. Your liability for unauthorized electronic fund transfers depends on when you report the loss or theft. (The following information applies in situations when the financial institution provides periodic statements for the prepaid account and the account isn't subject to an exception for unverified accounts.) (12 C.F.R. § 1005.6).
Tip: Register Your Card Immediately
To receive most of the protections discussed in this article, you must register your prepaid card.
Within two business days. If you tell the financial institution within two business days that your "access device" (see below) has been lost or stolen, then your responsibility for unauthorized charges is limited to:
An "access device" is a card, code, or other means of access to a consumer's account, or any combination thereof, that may be used by a consumer to initiate electronic fund transfers.
More than two business days after learning of the loss or theft, and up to 60 days after statement transmittal. If you notify the financial institution more than two business days after learning of the loss or theft, but up to 60 days after transmittal of the statement showing the first unauthorized transfer made with an access device (or when you electronically access your account, depending on the circumstances), your liability can't exceed the lesser of $500 or the sum of:
More than 60 days after statement transmittal. If you notify the institution about an unauthorized electronic fund transfer that appears on your periodic statement more than 60 days after the statement is transmitted (or when you electronically access your account), for transfers within the 60-day period, your liability is the lesser of $500, or the sum of:
For transfers after the 60-day period, you have unlimited liability until the financial institution is notified, provided the financial institution demonstrates that these transfers would not have occurred had you given notice within the 60-day period.
If the card or access device was not lost or stolen, your liability depends on when you report the unauthorized electronic fund transfer.
Within 60 days. If the access device was not stolen or lost, if you notify the institution within 60 days after transmittal of the periodic statement on which the unauthorized transfer first appears or when you electronically access your account, then you have no liability.
After 60 days. If you report the unauthorized transfer more than 60 days after transmittal of the periodic statement on which the unauthorized transfer first appears or when you electronically access your account, you have unlimited liability for unauthorized transfers that happen 60 days afterward and before notice to the financial institution.
The rule also protects consumers from expensive overdraft penalty fees, provides a process that financial institutions have to follow for investigating and resolving errors, and requires the financial institution to give consumers free and easy access to account information.
Know where your credit, debit, ATM, and prepaid cards are, and make sure they're secure. Here are some more tips for using and protecting your cards.
The Federal Trade Commission website is a useful resource for information on consumer protection laws and issues related to credit, debit, ATM, and prepaid cards and their use. If you have an issue with your card issuer or bank, you may submit a complaint to the Consumer Financial Protection Bureau (CFPB). The CFPB will forward your complaint to the company and work to get you a response.
For more information on finances, debts, and how to regain financial health, get Solve Your Money Troubles: Debt, Credit & Bankruptcy, by Amy Loftsgordon and Cara O'Neill (Nolo).