Credit Card: What is a lost card liability? MintGenie explains

Have you ever wondered what would you do if you lost a credit card, and consequently witnessed an unauthorised transaction before you could get it blocked? The immediate response of a credit card user would be to intimate the bank or financial institution as soon as the card is lost. 

However, what would happen if you face an unauthorised transaction on the lost card? Would you incur any liability for the loss of funds to fraud? For this, it is vital to understand that the liability that a credit card user incurs depends on the timeframe within which the credit card's loss was reported to the bank.

What is lost card liability?

For the uninitiated, a lost card liability refers to the liability suffered by a user for an unauthorised transaction carried out on a lost credit card. In other words, it is the liability for lost or stolen credit cards that a card user has to incur. The amount of liability one has to incur on account of unauthorised transaction is governed by the rules framed by Reserve Bank of India (RBI).

These rules stipulate that the credit card user doesn't have to incur any liability if s/he informs the bank within 3 days of losing the credit card.

In case the customer reports the unauthorised transaction within 4 to 7 days their maximum liability is limited to the following:

1. ₹10,000 for basic or standard credit cards.

2. ₹25,000 for more premium cards such as platinum or signature cards.

Full liability

There could be full liability for the credit card user if s/he fails to report the loss of card. Additionally, if the credit card holder fails to report the loss or theft within seven working days, then they may be liable for the entire amount of the transaction. Liability can be even higher based on when the issue is reported and the gravity of customer's negligence.

In case the unauthorised transaction takes places before the customer reported the loss of the credit card, the liability is limited based on two factors: timeframe of the report and the bank-specific policy with regards to loss of card.

Immediate reporting

The cardholder must report the loss or theft of the credit card to the bank immediately through customer care or other channels provided by the bank (e.g., SMS, mobile app).

Bank’s policy: Each bank may have slightly different liability policies subject to the RBI's regulatory framework . Customers should check their bank’s terms and conditions for specific details. So, it is vital for the cardholder to report the loss or theft of the credit card to the bank as soon as possible via customer care or other channels of communication provided by the bank.

Additionally, each bank may have a different policy relating to liability that stems from the loss of credit card. Therefore, it is recommended that the customers check their bank’s terms and conditions for specific details. 

All in all, the RBI framework aims to protect customers from financial losses arising out of unauthorised transactions while ensuring at the same time that they report the loss immediately in order to minimise the risk.