Unauthorized credit card transactions can undoubtedly scare you, but you don’t have to pay for these charges if you find and report them as soon as possible. In order to do the same, you will have to pay close attention to every transaction on your credit card statement. With the rise in credit card frauds, the question arises as to who is liable for such frauds? RBI has recently revised the draft guidelines on “Customer Protection – Limiting Liability of Customers in Unauthorised Electronic Banking Transactions”. Let’s understand what should be done in case you witness an unauthorized transaction.
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What are unauthorized or fraudulent transactions?
An unauthorized transaction is something that was not performed by you and you did not permit anyone else to make. Fraudulent transactions could be made by any stranger or someone who steals your credit card or account information for personal benefits. Listed below are some of the most common ways of how unauthorized transactions are carried out:
- Cards intercepted during transit: This happens when you open a new account or get a new credit card.
- Skimming: This happens when the information in your card’s magnetic strip is copied by inserting it in an electronic device.
- Phishing: These are email traps, where you receive emails from people supposedly working at banks or government agencies and asking for confidential details pertaining to your account or credit card.
- Account Takeover: This happens when you unknowingly share your personal information, with a stranger, who can use it to make online purchases.
- Loss of card: If you happen to lose your card, chances are it may land up in the hands of a fraudster who can use it to conduct transactions till the time you report it lost and get it blocked.
- Card-not-present (CNP) fraud: Here, the fraudster would use your card number and expiry date to conduct a transaction over phone or mail.
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What should you do when a fraudulent transaction is conducted on your account?
It is significant to act quickly to protect your account and to stop any further unauthorized charges. Follow the below-listed steps if you find an unauthorized charge on your account.
Step 1- Contact the bank immediately
Inform your bank about the unauthorized transaction as soon as possible, maximum within 3 days of occurrence. You can inform them by contacting via Toll-Free number, customer care number, phone banking, SMS, email, or by visiting any closest branch of the concerned bank.
Step 2- Change your online passwords and PINs
Immediately change your online password and PINs related to your credit card account to prevent fraudsters from doing any further damage.
Step 3- Closely monitor your account activity
This can be helpful if you are not sure how your information was compromised. Also, keep a close eye on your bank statements and if you notice any signs of fraud, immediately notify your credit card issuer.
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When are you liable for a fraudulent transaction and when not
|Scenarios when you are not held liable||Scenarios when you are held liable|
|In case of credit card frauds, negligence or lack of appropriate checks on the part of the bank, even if you fail to report it to the bank||Delay in reporting by 4 – 7 working days: You will have to pay an amount equal to the transaction value or as per the bank’s policy, whichever is lower|
|When the fraud occurs due to your negligence but you report the incident within 3 working days||Delay in reporting beyond 7 working days: You will be liable to pay as per the bank’s policy. The maximum liability will vary according to the account that has been breached|
Table 1: Customer’s Liability during Fraudulent Transactions ( by days )
|Days taken to report the fraudulent transaction||Customer’s liability|
|Within 3 working days||Zero liability|
|Within 4 to 7 working days||Transaction amount or the amount mentioned in Table 2, whichever is lower|
|Beyond 7 working days||As per bank’s Board-approved policy|
When you delay reporting the incident by more than 7 days, you will be liable to pay as per the bank Board’s-approved policy (refer Table 2 for details).
Table 2: Details of Customer Liability in case of Fraudulent Transactions (By Account Type)
|Type of Account||Maximum liability|
|BSBD (Basic Savings Bank Deposit) Accounts||Rs. 5,000|
What happens after you report a fraudulent transaction?
The moment when you notify the bank regarding an unauthorized transaction, your bank’s representatives will immediately block your account or card, after confirming some personal details. After you get done with reporting, you shall not be held liable if any other unauthorized transaction occurs.
Suggested Read: How to block your credit card?
What happens in case of disputed transactions?
- If a bank happens to dispute the transaction you have reported, then the burden of proof will fall on your bank
- It will have to prove that either you acted fraudulently or shared sensitive information and were complicit in the fraud
- In such a scenario, if the bank dismisses your complaint or responds in a dissatisfactory manner, you can try reaching your bank’s ombudsman
- After proper investigation, the ombudsman shall announce its ruling. If you are not content with this ruling, you can also reach out to the appellate authority, headed by the Deputy Governor of RBI, within 30 days of the previously said ruling
- Post this, the only option left is to approach the High Court to resolve the fraud
Must Read: The 2-minute guide to Credit Card Fraud
When will the fraudulent transaction be reversed?
If you notify the bank within 3 days of an unauthorized transaction, your liability is zero. So, the bank will have to credit the amount within 10 working days from the date of notification.
RBI Guidelines for Banks – How to Protect Customers Against Unauthorized Transactions?
The Reserve Bank of India has come up with a Two-Part approach to deal with such frauds.
- Part One includes advisory and awareness campaigns. Herein banks will have to constantly advise its customers on how to protect themselves from electronic banking and payments related frauds
- Part Two shall include setting up of processes and mechanisms by banks to prevent and detect fraud systems and procedures
How do banks ensure secure transactions?
Mandatory Registering for SMS Alerts: The only way to ensure whether authorized transactions are carried out is to notify users every time whenever there is any transaction. Banks make it compulsory for you to register for SMS alerts and even email alerts for all banking transactions. So, whenever a transaction will happen in your account, you will immediately get an SMS on your mobile number and email address registered with the bank.
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Tips to Conduct Online Transactions Safely
Given the amount of time we spent in front of a computer screen, it’s important to follow some simple steps to ensure all our financial transactions, such as net banking and online bookings and purchases are secure. Take a look:
- Anti-virus software: Always use a licensed and latest version of anti-virus software to ensure complete protection against malware, phishing and Trojan virus.
- Auto-update all software: Web browser companies regularly update their software by periodically releasing patches or version updates. It can be difficult to keep up with these updates manually, so it’s better to activate the auto-update option for all software installed in your computer or mobile
- Use different passwords: Don’t keep a common password for all your bank accounts, credit cards, emails and many other online accounts. Ensure you have a unique and different password for each account and never share it with anyone.
- Avoid using public computers: When conducting financial transactions, avoid using public computers those include internet cafes or any public place where internet usage is accessible. Most of these systems do not have requisite anti-virus software, thus compromising your account’s security.
- Conduct online purchases with reputed companies or merchants: When making purchases online, it is important to ensure that the merchant’s website is secure. One of the ways to ensure is checking whether the site is “https” and also make sure that there is lock symbol before the site’s name in the address bar. A lot of small merchants do not implement tough security mechanisms, making customers more vulnerable to the data breach.
Do not hesitate and inform your bank immediately in case of loss of card or account hacking or any fraudulent transaction you witness. Also, follow up with the bank with respect to any action or steps taken after your notification. It is advised to monitor your account regularly to keep a track of any fraudulent transactions if conducted.