How to reverse unauthorised credit card transactions

Learn how to protect yourself against unauthorised credit card transactions.

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Whether it’s due to card theft, account hacking or perhaps a glitch in payment processing, unauthorised credit card transactions are certainly something you want to avoid. While there are fraud protection policies in place to help safeguard against such events, there are instances when you may become liable for the loss arising from such transactions. This guide explains everything you need to know about unauthorised transactions and how to prevent them.

What is an unauthorised credit card transaction?

Unauthorised transactions are payments made by someone else using your credit card account without your approval or knowledge. There are two ways this can happen:

  • Processing errors. A processing error occurs when you make a payment and is usually the result of technical issues with the payment service or Internet connection. For example, you could accidentally be charged twice for something because of a faulty connection, a software glitch or because you reloaded a payment page while shopping online. Note, processing errors can arise through merchants and credit card issuers. In most cases, you should be able to reverse the charge by contacting the merchant or your credit card issuer directly.
  • Fraudulent transactions. Fraudulent transactions are intentional,illegal, and result from criminal activity that occurs when your account is compromised. A clear example of credit card fraud is if your card is stolen and the thief uses it to make a purchase. Similarly, if your card details are stolen through online hacking, that is considered fraudulent too. After contacting your credit card company and an investigation is carried out, in most cases, you will receive a refund of the full amount taken in a fraudulent transaction.

Tips to avoiding unauthorised credit card transactions

These ten tips will help minimise the risk of an unauthorised credit card transaction:

  1. Review your credit card transactions. If an unauthorised transaction occurs, it will show up on your credit card account and statement. Take the time to review your statement details regularly and be on the lookout for any unauthorised transactions. Should you find any, call your credit card provider to prevent any more activity on the card.
  2. Don’t share your PIN or other card details. You will not be able to get your money back if you don’t keep your PIN or password secret. If your credit card providers feels you have not taken reasonable care of your PIN or password, and you are liable for the loss, the Banking Ombudsman Scheme can be called on to mediate. However, the onus remains on you to protect your card details, even from loved ones.
  3. Only make payments through secure services. This relates to online payments, where you should only make transactions on web URLs beginning with “https” that show a locked padlock symbol. It also applies to your Internet connection, which means you shouldn’t make transactions using public connections such as free Wi-Fi networks in cafes or airports. These networks are far less secure than private, password-protected connections and increase the risk of hacking.
  4. Get up-to-date antivirus software. Stay protected with anti-spyware and antivirus software, especially if you often buy goods over the Internet. This protects your accounts from online hacking.
  5. Be prudent on the Internet. Many online accounts and services now suggest you store your credit card details for ease of payment. The problem with this is some of these services hold enough details about you for a criminal to steal your identity. It is important to protect your accounts, by limiting the information you provide and using complicated and varied passwords. Practice safe email protocol and don’t open messages from unknown senders.
  6. Look for signs of tampered devices. This relates to credit card skimming and is very important at ATMs and stores when you use your card. A good practice is to look for irregularities when at the ATM, particularly for machine parts that look odd, overly new or loose. When paying in a store, make sure your card stays within sight and only gets swiped once. Always shield your PIN when entering it.
  7. Report lost or stolen cards. Immediately reporting a lost or stolen credit card reduces the window of opportunity for unauthorised transactions to be made. It’s also one of the criteria for fraud protection. Even if you think you’ve simply misplaced your card, call your credit card company to inform them, so they keep a close eye on your account. You may even be able to freeze your account while looking for your card. For example, Westpac lets you temporarily lock your card to prevent unauthorised charges.
  8. Keep track of when a new card should arrive in the mail. If you’ve applied for a credit card or your old one has expired, make sure you regularly check your mailbox to ensure you receive your new card on time. This will alert you to mail theft that could lead to unauthorised transactions, especially if the card is enabled for contactless payments.
  9. Contact the merchant if there is a processing error. Contact the merchant as soon as you realise there’s been an issue with payment. This will speed up the resolution process if a transaction has been made by mistake. If you’re in-store when it happens, talk to the person serving you and/or the manager to see if they can reverse the transaction immediately. If you’re online, contact customer service so they can look into it as quickly as possible.
  10. Contact your credit card issuer about anything suspicious. The rule of thumb is to inform your card issuer about any suspicious activity as soon as possible. If it’s an unauthorised charge from a merchant you’ve done business with, they may advise you to resolve it directly. However, when it’s fraudulent or not possible to reverse the transaction via the merchant, your credit card issuer will launch an investigation and guide you through the resolution process.

Other forms of protection against unauthorised transactions

These are the default forms of protection available to consumers, depending on your card type:

  • Fraud monitoring services. Most credit card companies have internal systems in place to prevent card fraud. This includes sophisticated software and an analytics team that monitor your credit card transactions, and who will contact you if they see unusual activity on your account. This is why you should always inform your card provider before going overseas, because they may freeze your account if their fraud-monitoring team thinks someone has stolen your card and is using it abroad.
  • Chip technology. Credit card chip-and-PIN technology offers you greater protection because anyone who steals your card also needs to know your PIN to use it (except for payWave and PayPass transactions below $80).
  • Verified by Visa. This is an extra layer of security for Visa cardholders when making transactions online with participating merchants. When making payments through the service, a one-time password is sent to your mobile phone to verify your identity and protect your card from use by card thieves.
  • Mastercard SecureCode. This is similar to Verified by Visa and is the process whereby Mastercard holders receive a security code on their mobile phones that they need to key in to verify online transactions.
  • Zero liability. Both Visa and Mastercard have zero liability policies that free you from liability for unauthorised charges made on your account. American Express also offers a Fraud Protection Guarantee that means you won’t pay for unauthorised spending. While the terms and conditions vary slightly for each company, all these policies cover card loss, theft and fraud both online and offline.

Even though consumer protection laws insure you against unfortunate events like card loss, theft and fraud, you’re better avoiding these issues when you can. Now you’re more aware of the possible risks, following the above tips will help safeguard your credit card account from unauthorised transactions and other related issues.

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