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.

Next >>