Zero Liability Policy
The Zero Liability Policy is basically a provision in credit card contracts which mentions that the cardholder is not likely to be responsible for any sort of unauthorized transactions done through the credit card. Most of the popular insurers provide zero liability policy which means that the cardholders are not bound to make payments for any unauthorized transactions.
As the cardholder is not required in any way to pay for those transactions, it is fair even if there is a fee associated with using the zero liability policy. They are relieved because they are not responsible for making payments as a result.
Why are Zero Liability Policies Issued?
There are various situations which could lead to fraudulent charges on the credit card statement. This results in a zero liability policy which will come into effect. The following are the two common situations:
Hacking
Hacking is one of the most popular tricks through which hackers get access to the database of the company which even contains the credit card details of its customers. Once the information is received by the hackers, they will sell the database to another criminal who makes unlawful purchases through the black market or directly. The scammers will have made a lot of fraudulent purchases before the true owner of the credit card, or the credit card provider realizes that the data has been hacked.
Phishing Scams
A phishing scam means sending fraudulent messages to lots of targeted victims with the hope that one of the victims will get into the trap. The sender of the message claims to be a popular company or an organization. The scammers will ask the receiver to enter their bank account details over SMS, email, or phone. Once the details are received by the scammers, they will get access to the funds with the consent of account holders.
Advantages and Disadvantages of a Zero Liability Policy
The main benefit of having a Zero Liability Policy is that you will not be responsible for any fraud which occurs in your bank account. If you do not have this policy, you can even be bankrupt if scammers successfully manage to get access to the funds.
On the other hand, the disadvantage of a zero liability policy is that if the fraudulent usage of a credit card is not reported instantly, the bank will consider the cardholder partially responsible for the loss. Thus, you need to check your credit card contracts to ensure that your credit card transactions are fair.
Why are Zero Liability Policies Issued?
As already mentioned above, credit card providers issue zero liability policies because customers find its risky to have credit cards. The revenues of credit card companies decrease as a result. Zero-liability policies are offered to clients by credit card issuing organizations in an effort to draw them in.
FAQs on Zero Liability Policy
- Is MasterCard Zero Liability?
Yes, MasterCard comes with a Zero Liability Policy which holds the cardholders responsible for fraudulent transactions.
- Does Visa Card come with Zero Liability Policy?
Yes, Visa card also comes with Zero Liability Policy.
- Do debit cards have liability?
Yes, debit cards do have liability.
Devarthi Gattuwar is a Finance Content Writer who has experience writing about Credit Cards, Debit Cards, Tax, and other BFSI products. Other than that, she also writes about non-financial utility products like Aadhar Card, Voter ID, Government Certificates, etc. She has a special interest in Social Media Marketing and its nuances. She likes to read and learn new things. She's a mental health advocate, LGBTQIA+ ally and a dog mom.
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