What is Zero Liability Policy?
Zero liability policy is a provision in credit card contracts, which state the cardholder is not going to be held responsible for unauthorised transactions made on the credit card. Zero liability policy is provided by almost all major insurers. This means that the cardholders are not liable to make payments for all unauthorised transactions and they cannot be legally persecuted.
Hence, even if there is some charge that a cardholder has to pay for availing zero liability policy, its worth it as the cardholder is not bound in any way to make payments for those transactions. This gives them a huge sigh of relief as they are not accountable for making payments.
Understanding Zero Liability Policy
When using a credit card, several scenarios may lead to fraudulent transactions that would not be noticed until the statement is seen. Hackers and fraudsters can break into the database of companies that store individuals’ credit card details. The same can be used to purchase goods and services or be sold in the black market. This will ultimately be reflecting on the card holder’s account statement.
If the same is not noticed, then the cardholder will have to make payments for that. The cardholder must intimate the card issuer of the unauthorised transaction, and the norms of zero liability policy will keep the cardholder away from bearing losses for these unauthorised transactions.
In some cases, the cardholder himself will be revealing his card details in a phishing scam. Here, the fraudsters and scammers will pose as a representative of an organisation and the cardholder will grant access to transact with the card.
Why Zero Liability Policies are Issued?
Credit card issuers provide zero-liability policies as the individuals feel it’s risky to have credit cards. This takes the revenues of credit card issuers down. In order to attract customers, the credit card issuing companies provide their customers with zero-liability policies.
