Do Credit Card Companies Investigate Unauthorized Charges?

Unexpected charges on credit card statements are a common concern. Understanding how credit card companies address these unfamiliar transactions can provide reassurance and clarify the necessary steps to take. Financial institutions employ various measures to protect cardholders and investigate suspicious activity. This process involves a clear definition of what constitutes an unauthorized charge, specific responsibilities of credit card companies, and established procedures for reporting and investigating such incidents.

Defining Unauthorized Charges

An “unauthorized charge” on a credit card statement refers to a transaction that a cardholder did not initiate or approve. This typically occurs when a credit card number is used by someone other than the account holder without permission, such as in cases of fraud or a stolen physical card. For example, if your credit card details are compromised online and used for purchases you never made, those would be unauthorized charges. Similarly, transactions made after your card has been reported lost or stolen are also considered unauthorized.

It is important to distinguish unauthorized charges from other types of billing errors or disputes. A disputed charge might involve a transaction you authorized but where you are dissatisfied with the goods or services received, were charged an incorrect amount, or were billed twice for the same item. For instance, if you paid for an item that was never delivered or received a faulty product, this would typically fall under a billing error dispute rather than an unauthorized charge. Recognizing this difference helps ensure the correct reporting and investigation process is followed.

Credit Card Company Responsibilities

Credit card companies are legally obligated to investigate claims of unauthorized charges, primarily under the Fair Credit Billing Act (FCBA). This federal law protects consumers from unfair credit card billing practices. The FCBA limits a consumer’s liability for unauthorized charges to $50, even if the actual fraudulent amount is much higher.

However, most major credit card networks and issuers extend this protection further through “zero liability” policies. Under a zero liability policy, cardholders are generally not held responsible for any unauthorized transactions, provided they report the activity promptly. The FCBA also mandates specific timelines for creditors, requiring them to acknowledge a dispute letter within 30 days and complete an investigation within two billing cycles, or no more than 90 days.

Reporting Unauthorized Activity

When you discover an unfamiliar charge on your credit card statement, reviewing your account activity regularly is an important step. If a charge appears suspicious, it is important to act quickly to report it to your credit card issuer. Most credit card companies offer multiple channels for reporting, including phone, online portals, or mobile applications. Contacting the customer service number on the back of your card is a common and direct method.

To facilitate the reporting process, gather specific details about the unauthorized transaction. This information typically includes the date the charge occurred, the amount, the name of the merchant involved, and any other relevant context that might help identify the charge. While some issuers allow digital reporting, sending a written notice within 60 days of receiving the statement where the error first appeared can also protect your rights under the Fair Credit Billing Act. Timely reporting allows the credit card company to initiate their processes more efficiently and helps prevent further unauthorized transactions.

The Investigation Process

After a cardholder reports an unauthorized charge, the credit card company begins a formal investigation. The issuer will typically cancel the compromised card and issue a new one to prevent additional fraudulent activity. During the investigation, the credit card company may apply a temporary or “provisional” credit to the cardholder’s account for the disputed amount. This provisional credit allows the cardholder access to the funds while the investigation proceeds, and it can remain in place throughout the inquiry.

The investigation involves the bank examining transaction data, reviewing account history, and potentially contacting the merchant for more information or evidence. They may analyze factors such as the location of the transaction, the time of day, and whether it aligns with typical spending patterns. Once the investigation concludes, the cardholder receives written notification of the decision. If the charge is determined to be unauthorized, the provisional credit becomes permanent; however, if the investigation finds the charge was legitimate, the provisional credit can be reversed, and the cardholder becomes responsible for the amount.