Zero-liability cards are useful

These come at the same cost as normal cards, but fraudulent online and ATM transactions aren't covered

The sheer fear of loss of a credit or debit card can give ulcers to most. Besides the monetary liability, it involves running from pillar to post to get the card blocked.

In case of a disputed transaction, it is the customer's responsibility to prove it is not his fault. Till then, he is liable to pay for the transaction. Eventually, if the customer is able to prove he is not at fault, the bank will refund the amount, but this could take time. To protect yourself against this, you can opt for credit or debit cards which have the zero-liability feature. Both Visa and MasterCard offer this feature. RuPay will start offering this by the end of this year or early January, said an official from National Payments Corporation of India. But unless your card issuing bank offers this facility, you cannot avail of it. Banks have to incur an additional cost for the insurance to cover the liability in case of a loss of card, which pushes up their cost, which is why not all banks offer it, while some offer it on select cards.

The advantage of this is that once the card is reported stolen or lost, the cardholder is not liable to pay for any transaction made on the card. In case of a debit card, the amount transacted will be restored to the cardholder's account.

While this is a given in some parts of the world, in India banks offer it selectively, says Uttam Nayak, group country manager for India and south Asia, Visa. The card company introduced this feature in India in 2004. There is no additional fee that the customer pays for this. “We realised that fraud was a big concern for customers,” he says.

ICICI Bank, HDFC Bank, Axis Bank and Standard Chartered Bank do offer this. But cardholders need to keep in mind the feature will not work in case of an automated teller machine or online transactions, since this requires the use of the PIN. It will work only if the card is used to swipe at a point of sales, at a shop or a merchant establishment.

Some banks may ask you for a written application with your card number, account number (in case of debit card) and date of loss of card; copy of the police complaint and copy of passport in case of a fraud abroad. While some banks insist the theft or loss should be reported within 24 hours for the facility to kick in, some allow up to 15 days.

While zero-liability as a policy is in countries like the US, in India it is not so. The Reserve Bank of India has indicated it would like to introduce a system whereby the customer would not be held liable in case of fraud transactions. But there has been no further guideline or further instruction from the regulator.