The theft of millions of customers’ credit and debit card data from Target, Neiman Marcus and other retailers last holiday season was a wake-up call for consumers who underestimated their vulnerability to credit and debit card fraud. While you can — and should — take steps to limit your exposure to potential fraudsters, experts believe massive data breaches are likely to continue happening.

Fortunately, federal laws can help limit your potential liability stemming from unauthorized charges.

Different Liability Limits for Different Card Types

In the case of credit cards, federal law says you are not responsible for fraudulent charges exceeding $50. If you report your card lost or stolen before any unauthorized purchases are made, or if your account number but not your actual card is stolen, you are not liable for any amount. In addition, check to see if your credit card provider has a “zero liability” policy protecting you from all fraudulent purchases.

The law is different for debit cards. You are not accountable if you report your card lost or stolen before any fraudulent activity occurs. If you report the card missing within two days of its disappearance, you limit your responsibility to $50. Your loss caps at $500 if you inform your bank after two days but within 60 calendar days after your statement mailing date.

Otherwise, beyond those 60 days, your liability is unlimited, which would include the full amount taken from your debit account and any money linked to it. It is strongly in your interest to pay close attention to your statements to avoid this worst-case scenario.

Vigilance is your Best Defense

Maintaining the security of your personal information is mostly a matter of taking common sense precautions. You can also request a free credit report from each of the three major credit bureaus (Equifax, Experian and TransUnion) once per year.

Additionally, for a fee, financial institutions, credit reporting agencies and third-party companies offer various levels of credit monitoring and protection services. For information on consumer protection laws and tips for safeguarding your account data, visit the Federal Trade Commission’s website.

Be Proactive

Consumer-friendly laws and credit card issuer policies can help you mitigate your losses, so long as you remain mindful of your accounts. In the end, there is no substitute for monitoring your account statements on a regular basis, including on any inactive accounts. Immediately notify your bank or credit card company of any discrepancies, because the sooner you act, the better your chance to limit the financial liabilities. For any questions, contact Adam Pechin at [email protected] or call him at 312.670.7444.