Credit card lost, and someone used it; who will cover the lost money - you or the bank?

Picture this: you lost your credit card, and a transaction (which you didn’t initiate) takes place. Will you still be liable to pay that amount even if you have reported the card to be lost/stolen? Well, it depends. The answer lies in how long you took to flag the unauthorised transaction.

It goes without saying that the first thing that any user should do if they lose their credit card is to block it before anyone uses it, so there's nothing to owe. Even if you are not sure if the card is stolen or lost, freeze it. Every bank lets users switch card transactions off and back on.

But the bigger worry is: what if a transaction takes place after you lose your card, and you don’t block it before that?

Credit card lost, money deducted: Do I owe the money?

A fraudulent transaction doesn’t automatically become the cardholder’s responsibility. It depends on how the fraud happened and when the bank was informed, Ashish Lath, Founder and CEO SaveSage told ET Wealth Online. The number of days also decides the customer’s liability.

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Once the loss or theft of a card is reported and the card is blocked, any subsequent unauthorised transaction should ordinarily be borne by the bank, elaborated Aditya Soni, Founder and CEO, CheQ. For any transactions made before reporting, liability is determined according to RBI guidelines and the issuer’s customer protection policy.

RBI rules state a user has zero liability in cases where the unauthorised transaction occurs in the following events:

-Fraud/ negligence/ deficiency on the part of the bank.

-Third-party breach where the deficiency lies neither with the bank nor with the customer but elsewhere in the system. However, the customer must notify the bank within 3 working days of being informed about the transaction.

If a transaction is made from my lost credit card, what do I owe?

Here’s some good news for you. If you report such a charge within 3 working days, there’s nothing you owe, and the bank would cover whatever amount was spent using your card. Lath, however, cautioned that the 3-day rule is not a blanket guarantee.

Where neither the bank nor the customer is at fault, and the breach happened elsewhere in the payment system:

REPORTING TIMELINE	CUSTOMER LIABILITY
Within 3 working days	Zero
4-7 working days	Liability per transaction is capped at Rs 10,000 for cards with a limit up to Rs 5 lakh, and Rs 25,000 for cards with a higher limit
Beyond 7 working days	Liability depends on the bank’s approved policy

“The clock starts from receiving the bank’s communication about the transaction, excluding that day and not from when the card went missing. Working days follow the customer’s home branch schedule,” he added.

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Credit card lost, stolen? Do this first

●Block the card immediately through the issuer’s official app, website or helpline. Request a replacement

●Check recent transactions and report each unfamiliar charge as fraud. Save the complaint number, acknowledgement and the time you reported it

●Report theft to the police. If financial cyber fraud has occurred, call 1930 promptly and lodge a complaint through theNational Cyber Crime Reporting Portal

●Complete the dispute and insurance paperwork promptly, and continue checking statements for further misuse

What if the monetary loss happened because of the bank’s error?

There could be an instance where, even when you have reported your credit card as lost/missing, an unauthorised transaction takes place because of the bank’s fault.

Here, the user would owe nothing to the bank. “If the unauthorised transaction resulted from the bank’s fraud, negligence or failure, the customer has zero liability, regardless of whether they reported it. The 3-working-day condition does not apply here,” Lath pointed out.

For their own good, customers should still report the transaction immediately so that the card can be blocked, further transactions can be prevented and the dispute can be formally registered, Soni added. The customer should also not bear any additional interest burden while the matter is being resolved.

However, bear in mind that if the loss resulted from your own negligence, such as sharing an OTP, PIN or other payment credentials, you may have to bear the loss incurred until the incident is reported, Soni shared, adding that the bank bears any loss occurring after it has been notified.

What if your credit card had a lost-card cover?

Lost-card cover may pay for eligible fraudulent transactions, including transactions within a specified period before the loss was reported. But the amount covered, reporting deadlines, exclusions and documents required depend on the policy, SaveSage’s Lath stated.

“It is not an automatic promise that every fraudulent charge will be reimbursed. Block the card, dispute the transactions and ask the issuer how to register the insurance claim. Keep the complaint acknowledgement, statements and any police report required under the cover.”

Remember that insurance does not replace the customer’s RBI protections. The bank must provide the prescribed provisional reversal within 10 working days of notification, without waiting for an insurance claim to be settled.

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Can a fraudulent transaction on your credit card affect your credit score?

Merely reporting the credit card loss does not automatically register a dispute against every fraudulent charge. According to Lath, the Reserve Bank requires issuers to hold back reporting a disputed default until the dispute is settled. “It also prohibits charges on transactions disputed as fraud while the dispute remains unresolved,” he said.

However, he advised that users must get written confirmation that the transactions are under dispute, ask what undisputed amount needs to be paid, and pay that on time.

It is worth mentioning here that if the disputed amount remains reflected as an outstanding balance and the account is reported as overdue, it could temporarily affect the customer’s credit report, said Soni.

To correct this, users should formally dispute the transaction, obtain a complaint number, pay all undisputed dues on time and monitor their credit report. “If an incorrect overdue or default entry appears, they should ask the card issuer and the credit bureau to rectify it,” he added.

"Lastly, there is one rule that should never be compromised: never share your OTP, PIN, CVV or password with anyone, even if they claim to be calling from your bank or card provider,” Soni pointed out.

Do not wait for a police complaint or insurance paperwork before informing the bank. It is only practical to report a missing card and have it blocked immediately. If there are already unfamiliar transactions, dispute those separately, Lath underscored.