What Happens if I Lost My Credit Card and Someone Used It?

Discovering that your lost credit card has been used can be an unsettling experience. This situation is not uncommon, and established procedures and protections are in place to help mitigate the impact. This article provides a guide on the steps to take and the safeguards available to cardholders.

Reporting the Loss and Card Deactivation

Prompt action is paramount upon realizing your credit card is missing and has been used without your permission. Immediately contacting your card issuer is the first and most crucial step. Card issuers typically provide 24/7 customer service lines for reporting lost or stolen cards, often found on their websites, mobile apps, or previous statements. Major networks like Mastercard and Visa also have specific phone numbers for reporting these incidents.

When you contact the issuer, be prepared to provide specific information. This includes your full name, the address associated with the account, and the date you noticed the card was missing. Having your card number readily available, if you know it, along with details of any recent recognized transactions or the last known location of the card, can help the issuer identify the account and unauthorized activity. This information helps the issuer quickly deactivate the compromised card to prevent further unauthorized use.

Upon reporting the loss, the card issuer will deactivate the compromised card, rendering it unusable for new transactions. A new card with a different account number is then issued and mailed to you. While delivery times vary, a replacement card generally arrives within three to seven business days. The account itself, including its age, usually remains the same, ensuring your credit history is not negatively impacted by the card replacement.

Understanding Your Financial Responsibility

Cardholders benefit from protections against unauthorized charges through federal laws and card network policies. The Fair Credit Billing Act (FCBA) protects consumers using credit cards by limiting liability for unauthorized charges to $50, provided the loss or theft is reported promptly. This federal law applies to open-end credit accounts and allows consumers to dispute billing errors.

Beyond federal law, major credit card networks like Visa, Mastercard, American Express, and Discover offer “zero liability” policies. These policies mean that cardholders are not held responsible for any fraudulent or unauthorized transactions. This protection surpasses the $50 liability limit set by the FCBA, reducing the cardholder’s financial exposure to zero for qualifying unauthorized uses. To maintain this protection, cardholders must have used reasonable care in protecting their card and reported the loss or theft promptly.

It is important to distinguish between credit cards and debit cards regarding liability. While the FCBA covers credit cards, debit cards are governed by the Electronic Fund Transfer Act (EFTA). Under EFTA, liability for unauthorized debit card transactions can be higher if the loss is not reported quickly:
If reported within two business days, liability is limited to $50.
If reported after two business days but within 60 calendar days of your statement being sent, liability can increase to $500.
Beyond 60 days, you could be liable for all unauthorized transactions.

These protections apply to charges made by someone who obtained your card information without your permission. Charges made by a family member or someone to whom you voluntarily gave your card, even if they exceeded the agreed-upon spending, may not be considered “unauthorized.” In such cases, the cardholder may remain liable for those charges, as the initial authorization for use came from the cardholder.

The Charge Dispute Process

After reporting the loss and deactivating the card, the next step involves formally disputing any unauthorized charges. The process for initiating a dispute typically begins by contacting your card issuer, through their online portal, mobile app, or by calling customer service. To preserve your rights under the Fair Credit Billing Act, you may need to submit a written billing error notice within 60 calendar days after the first statement containing the error was sent.

When submitting a dispute, provide specific details about each unauthorized transaction. This includes transaction dates, merchant names, and amounts. Any supporting documentation, such as receipts or screenshots, can strengthen your case. The card issuer will acknowledge your dispute in writing, usually within 30 days of receiving your complaint.

During the investigation, the card issuer cannot collect the disputed amount or any related finance charges. Many issuers also apply a provisional credit to your account for the disputed amount. The Fair Credit Billing Act requires creditors to resolve the dispute within two billing cycles, or a maximum of 90 days.

The outcome of the dispute will be communicated to you by the card issuer. If the dispute is resolved in your favor, the provisional credit becomes permanent, and the unauthorized charges are removed from your account. If the investigation determines the charges were valid, the temporary credit may be removed, and the original charges re-applied to your account. In such instances, the card issuer must provide a written explanation of their findings.

Safeguarding Your Financial Future

Beyond addressing the immediate issue of a lost or misused credit card, taking proactive measures is important to protect your financial future from fraud and identity theft. Regularly monitoring your bank and credit card statements is a defense. This practice allows you to quickly identify any unfamiliar transactions or discrepancies, which can be early indicators of fraudulent activity. Many financial institutions offer online banking and mobile apps that provide real-time access to transaction history.

Setting up transaction alerts is another way to stay informed about your account activity. These alerts, delivered via text message or email, can notify you of purchases over a certain amount or international transactions. Receiving immediate notifications for suspicious activity enables you to respond quickly and report any unauthorized use.

To further protect yourself, consider placing a fraud alert or a credit freeze with the major credit bureaus: Equifax, Experian, and TransUnion.

Fraud Alert

A fraud alert is a notice on your credit report that advises creditors to take extra steps to verify your identity before extending new credit. An initial fraud alert lasts for one year and can be renewed. You only need to contact one of the three credit bureaus to place an initial fraud alert, and that bureau will notify the other two.

Credit Freeze

A credit freeze, also known as a security freeze, restricts access to your credit report, making it harder for identity thieves to open new accounts. Unlike a fraud alert, you must contact each of the three credit bureaus individually to place a credit freeze. Neither a fraud alert nor a credit freeze will negatively impact your credit score. While a credit freeze is more restrictive, it provides security against unauthorized account openings.

Periodically reviewing your credit reports is also a long-term habit. You are entitled to a free copy of your credit report from each of the three major credit bureaus annually. Reviewing these reports helps you verify the accuracy of your financial information, identify any accounts you don’t recognize, and ensure your payment history is correctly reported. This vigilance helps detect potential identity theft or errors that could affect your creditworthiness.