This Popular Credit Card "Perk" Might Be a Bigger Headache Than It's Worth

While we love using credit cards to earn rewards on everyday purchases, unauthorized charges are a serious (and stressful) issue that requires swift action to protect your financial security and alleviate stress. 

But now, one feature designed to save time when a credit card is lost or stolen has become a double-edged sword. When you receive a new card, your card issuer often updates your card information automatically with merchants who have your card details on file. 

While this is convenient, it can perpetuate fraud if unauthorized merchants continue to charge your account.

A new article from the Wall Street Journal highlights multiple credit card users who still faced unauthorized charges despite replacing their cards. 

Card networks like Mastercard and Visa are now enrolling cardholders in updater programs by default, citing customer preference. However, as more people store card information across various sites and apps, the risk of fraud increases. 

While banks claim customers are never liable for unauthorized charges, resolving issues like these is cumbersome and frustrating.

No matter the root of the issue, quick action is essential when dealing with unauthorized charges on a credit or debit card. Not only does it help ensure that you’re not held responsible for fraudulent transactions, but it also mitigates potential financial fallout.

Here are the seven steps you should take immediately if you spot an unauthorized charge on your account.

Federal law restricts your liability for unauthorized credit card activity to just $50. But even though you will not be held liable for most unauthorized charges, you should not delay in taking action.

As soon as you notice an unauthorized charge on your credit card, contact the card provider. You do not want whoever took your card to continue using it. 

Once you report that the credit card is missing or has been used fraudulently, you can’t be held liable for any transactions that occur after that time.

If you spot an unauthorized charge on a debit card, it is even more important to report the activity promptly. Debit card protections are not as robust as those associated with credit cards, so you really want to act fast.

When you call to report an unauthorized charge, you’ll likely be directed to the fraud department, and a customer service agent will walk you through the next steps.

According to the Consumer Financial Protection Bureau, you should keep a file of all written communication and records of the dates of all contacts with your card provider throughout the reporting process.

You likely won’t have much chance of actually catching the person who used your card, especially if they’re located halfway across the country or on the other side of the world. However, your bank or credit card provider still may require that you file a police report.

Doing so gives you a formal, traceable record of the incident. And if the fraud balloons to a bigger situation than initially expected, you’ll be glad you filed a report with the police.

When you alert your card company to the unauthorized charge, ask if you will also be required to formally dispute the charge. In many cases, your initial phone call will be enough, but that is not always the case.

At some point, you might be asked to submit a statement disputing the charge. Throughout the process, make sure you closely follow the card company’s rules for dealing with unauthorized charges.

Reach out to the vendor where the unauthorized charge occurred and let them know what happened.

Whether the business is online or brick and mortar, let them know that your card was used fraudulently at their business.

If the unauthorized activity was relatively minor or caught immediately, your financial institution will likely deactivate that card and issue a new one without closing the account itself.

However, if the fraudulent activity was serious, there may be a larger impact on your account, and the credit card company or bank might shut down the account altogether.

Regardless of whether it’s a new card or a new account, make sure to reach out to any merchants where you have automatic bill pay and let them know about the new card number or account — and keep an eye out that it's not the service provider's account itself that's actually compromised. 

Once you alert the credit card company or bank to what has happened, they should act quickly.

Debit card issuers should investigate your claims and take action in no longer than two weeks. It can take a bit longer with credit card companies.

If you are unhappy with how things are proceeding, you can file a complaint with the Consumer Financial Protection Bureau.

Hopefully, an unauthorized charge is a one-off situation. But out of an abundance of caution, continue to monitor the account with the unauthorized activity and all other accounts.

It’s possible that the criminal was able to access more of your information and will engage in nefarious activities using additional accounts. So, keep an eye on all of your accounts, and flag any fishy activity immediately.

Taking the correct steps to immediately address unauthorized activity is the best way to nip the problem in the bud and keep more money in your wallet.

Once you are aware of the problem and begin moving to fix things, take other steps to reduce the odds of something similar happening in the future. This might include using a password manager and being very careful about giving out important personal details.