By Lorna Tan, Senior Correspondent

Credit card holders had good reason to cheer earlier this month when banks agreed to cap cardmembers' liability for unauthorised transactions to just $100.The move, which is effective from Nov 1, means individuals will be liable for only the first $100 if their cards are lost or stolen and unauthorised transactions are subsequently charged to them.

Only two card issuers, American Express and Maybank, had liability caps of $100 and $500 respectively prior to this decision.

The initiative was prompted after three banks insisted a customer make good $17,100 in charges following the theft of her credit cards from an unlocked car. It led to customer uproar and the banks' U-turn to impose a liability cap - up until then something the industry had refused to do.

While this move is good news for cardholders, it should not be forgotten that banks can still hold you liable for unauthorised transactions if you act fraudulently or with gross negligence. Acting fraudulently means you have the intention to deceive the bank.

And liability also falls on the cardholder if he fails to notify the card issuer as soon as he is aware his card has been lost or stolen.

Depending on the outcome of any investigation, card-issuing banks can use their discretion and consider doing away with the $100 liability cap. Interest charges and late fees will not be levied during the investigation period.

If a cardmember is found to be involved in fraud or considered grossly negligent, he will be liable for 100 per cent of the unauthorised charges or the amount up to his credit card limit, whichever is lower.

Whether interest charges and late fees are levied on the unauthorised charges depends on the severity of the offence. If the cardholder is found to be involved in the more serious offence of fraud, he will be liable to cough up the charges and late fees.

However, if he is considered grossly negligent, banks may be prepared to waive the charges and fees.

The authorities point out that to prevent credit card fraud, it is critical that cardholders keep their credit cards safe, just as they would their cash.

CASE 1: Leaving credit cards unattended in a public place

Lisa left her wallet on her desk in an office she thought was secure given that she shared it with colleagues. But her credit card was stolen while she was away from her desk, used for purchases, and returned to her wallet without her noticing.

She realised something was amiss only when she received her credit card statement a few weeks later, and immediately reported the matter to the bank.

By leaving her credit card unattended in an area easily accessible to others, Lisa was considered grossly negligent. She was held liable for the unauthorised transactions charged to her credit card before she reported the matter to the bank.

CASE 2: Leaving credit cards in a safe place, but failing to notify loss immediately

Jimmy left his wallet containing his credit cards in a gym locker. Someone broke into the locker, stole the wallet and used Jimmy's credit cards for two hours while he was using the gym.

If, upon discovery of the theft, Jimmy had failed to notify the card-issuing bank immediately, he would have been liable for all fraudulent charges to his credit limit.

But, if he had informed the bank immediately, his maximum liability for unauthorised transactions concluded prior to the notification would have been $100.

What you can do

• Treat your credit cards like cash. Keep them safe, especially in public places. This includes office environments where others have easy access to unattended belongings. Where possible, keep your credit cards under lock and key. It is important not to leave them visible as this may encourage theft. 
• Never leave credit cards and documents containing credit card information - such as card number, expiry date, PIN or password - carelessly in places where they may get stolen. 
• Check regularly to ensure that your credit cards are in your possession. Keep your credit cards in the same place after use. This way, you will easily notice if any or all of your cards are lost or stolen.

CASE 3: Being careless with your PIN

Thomas wrote his credit card PIN on a piece of paper and placed it in his wallet along with the credit card. His wallet was stolen and the credit card was used for unauthorised ATM withdrawals.

In this case, Thomas was considered grossly negligent in disclosing his PIN and was liable for all the fraudulent withdrawals.

What you can do

• Memorise your PIN and password and do not divulge them to anyone. Do not give your credit cards details - card number and expiry date - to unknown parties as the information can be used to make unauthorised transactions. 
• Keep your credit card sales slips, statements and other information about your credit card in a secure place. 
• Do not let your trash become someone else's treasure. When discarding documents relating to your credit cards and transactions, shred them to ensure confidential information is destroyed. Destroy expired credit cards.

CASE 4: Notifying the card issuer immediately

David was pickpocketed while abroad on vacation. The theft was discovered when he tried to pay a restaurant bill and he immediately reported the matter to the local police. He also called family members so that they could report the loss to the credit card issuers on his behalf.

Unfortunately, the stolen credit cards were fraudulently used before the credit card issuers were notified.

Taking into account the fact that David reported the theft of the cards to police as soon as he discovered their loss, and had got family members to notify the card issuers as soon as he could, the bank limited David's liability to $100 per card.

What you should do

• Notify the card issuer immediately. Take note of the date and time you notified the card issuer. 
• Always have a list of card issuers' hotlines for reporting stolen or lost cards. Do not worry if you cannot remember your credit card number and expiry date. The card issuer should be able to trace these if you provide your name and identity card or passport number. 
• Report the loss of your credit card to the police. This is important because the bank will usually require you to submit a copy of your police report should there be unauthorised transactions. If it is impractical for you to lodge a police report because you are overseas, the bank may require you to make a statutory declaration.

Other steps that you can take

• Always sign your cards with permanent ink as soon as they arrive. 
• Exercise care when using credit cards for telephone and online purchases. Have a credit card with a lower credit limit for these purposes. Do not perform online transactions in public places such as cybercafes. Patronise only reputable and legitimate online stores. 
• Check your billing statements promptly when they arrive, especially after every overseas trip. If you notice any discrepancy, call the card issuer immediately. You should also take note of all interest charges, including overseas billings. Retain receipts for easy verification against the charges that appear on your credit card bill. 
• Do not take too many credit cards with you when you travel overseas.

This article was first published in The Straits Times.