Cardholder: 'Guilty' until proved 'innocent' in case of misuse

In case of fraudulent usage of credit cards, lodge a formal complaint and keep proper documentation. Don't rely on verbal communication with the bank

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Recently, there have been several reports of fraudulent transactions on credit cards, with amounts running into lakhs of rupees. Perhaps it is because of the sums involved or because the cardholders reported the matter to the police, that the banks investigated and resolved these cases.

But there are several cases that go unreported, where the amounts are smaller. Often, despite repeated complaints and follow ups, the bank may refuse to accept that the transaction is a fraudulent one. In such a case, the cardholder may have no other option but to settle the disputed transaction. If not, the card could be cancelled and it will be difficult for the cardholder to get a credit card later on, since banks now share data on customer behaviour through credit bureaus.

What should you do if there is a fraudulent transaction on your credit card? Until the card is blocked, the cardholder is held liable for any transaction. So, if you notice a fraudulent transaction, the first thing you must do is to block the card and inform your bank about the transaction. You should then register the transaction as a disputed transaction with the bank. The bank gives the cardholder the option to either settle the transaction upfront and wait for a refund in case it is proved to be a fraud, which can be a herculean task in itself, or the customer can wait till the investigation is complete. But if the transaction is proved genuine, the cardholder will have to pay the entire amount, with interest. It is a case of the cardholder being considered 'guilty' until proven 'innocent'.

With several cases of frauds being reported where the card is used in overseas transactions, banks now take time to investigate, says V N Kulkarni, of debt counselling centre, Abhay.

"If the cardholder has some physical proof that he was in some other city when the card was used, he should show that. That will make the case stronger," Kulkarni says. It is very important to have proper documentation of the complaint, says Harsh Roongta, of Apnapaisa.com. "Verbal communication with the bank just does not work. Always keep documentation of your complaints and build your case. If the bank refutes your complaint, tell them to give that in writing too," he says.

According to the Annual Report on the Banking Ombudsman Scheme for 2011-12, card-related complaints at 21 per cent of total complaints received, constituted the single largest ground of complaints received. Credit card-related complaints were over 5,000. While the bifurcation of complaints is not available, skimming of cards was one of the complaints, the report said.

Faced with the rising number of credit card frauds happening overseas, the Reserve Bank of India has issued a directive to banks to replace all magnetic strip credit cards with EMV chip + PIN cards. In the first phase, all customers who have used their cards internationally at least once should have their cards replaced by June 30, 2013. But it is in your own interest to get your old card replaced, even if you have not used it overseas, yet.

"The very fact that so many frauds have taken place indicates that the systems are not robust. Some banks have temporarily stopped overseas use of credit cards," Kulkarni says. To avoid possible misuse of credit cards, it is advisable to use pre-paid travel cards, while travelling abroad.

Don't use your card on an unsecured website since there are chances of it getting cloned. If your card is misused, block it as soon as possible and register a formal complaint with the bank. Keep documented proof of the communication with the bank. If you have proof that you were in another city, show it to your bank. And in case of a big amount, lodge a police complaint, even if it is a cumbersome process.