Credit Card Holder be AWARE

I share this with those of you who perhaps think that fraudulent credit card transactions are automatically refunded to your account.:

The case

Your partner has a supplementary card on your principle credit card account. Your partner receives a call from the issuing bank to verify the authenticity of a transaction that is in excess of the established limit of USD 1,000. Your partner clearly indicates it’s a fraud. The Bank then asks about another 25-odd transaction over a period of 6 business days conducted with institutions that are not your usual shopping outlets. All are fraudulent. Your partner then discovers that the card is no longer in your partners possession and asks the bank to “stop” or “block” or “cancel” the card.

The Bank stops the card and re-issues a new card. The Bank asks that you complete a police report for the 25 items and removes the one item in excess of S1,000 – all others remain on your card. The Bank maintains that the liability for these transaction rest with the card holder not the Bank as the card holder should have reported the loss to the Bank!

The 25 transactions were cleverly staged – the card was used to obtain cash or goods at well-known retail shops starting with small amounts and increasing by each transaction. The total of these transactions came to $3,500. The Bank was not prepared to re credit these items (even during investigation) as they did not consider that they had responsibility for them. They all took place before the cardholder reported the card missing.  The bank debited the value to the associated bank account as usual end of the month.

The follow up

In this Banks case it was interesting to note that the Banking division did not want to get to involved in the Card divisions area of responsibility. They suddenly were very independent. “You must speak to the card division on that item we can’t help you with that directly Sir”. Over a period of close to 6 months, 4 follow up phone calls and three letters were written requesting the Bank to explain what exactly the cardholder should have done or should do going forward to avoid this situation occurring again. The key arguments are as follows:

1.      The transactions were not originated and not by the cardholder

2.      The cardholder was only made aware of the fact the card was missing when the Bank called the cardholder. The cardholder uses several cards, and this was not one that was used frequently.

3.      The cardholder had the recommended bank alert limit allocated to the card $1,000. When that alert (SMS) was tripped the cardholder immediately responded and asked to cancel the card. Without this alert you have no knowledge until looking online or at month end when the statement arrives what has been charged.

4.      The transactions on the card were clearly not of usual pattern spending – many transactions at same shops that were never used by the cardholder in 10 years! It was clear that either the bank had no pattern technology, or it was not used correctly.

5.      The cardholder did not know where the card was. There is an underlying assumption that the cardholder must know where all credit cards are at anyone time. When you awake in the morning the first thing you should do is check you know where all your credit cards are!

This last point is very important. It was explained to us in a call that had the transaction been conducted online – the bank would have immediately refunded the charges. The fact the card was not in the cardholder possession placed the onus of responsibility onto the cardholder.

We have never had anything in writing from the bank other than a copy of the terms and conditions. After consulting with friend and colleagues we have made the following changes to the cards that we use going forward.

·      Select 2 or 3 card that you need and close the rest. Its to hard to monitor many cards and the onus of proof and ultimate risk falls to you in the event of a loss.

·      Set the alert limit to $ 1.00. Depending on your usage this will generate more SMS messages (that cost money) but protect you in the event you do not know where your card is.

·      Think hard about online transactions versus physical card loss!

To conclude in this case after 6 months we did get the money back. The card convenience coupled with pay wave and other increasing free signature limits comes with higher risk especially when banks don’t make money! The risk that was absorbed in the past now comes at much more cardholder effort to get money back stolen from there card.