The number of credit card holders who have become victims of cyber frauds has risen exponentially. In the recent past, electronic payment systems have become vulnerable to new types of misuse. The Reserve Bank of India (RBI) in February asked banks to put in place certain security and risk measures. The apex bank released new guidelines to make payment through credit or debit card more secure. According to RBI data, the number of credit card frauds rose to 1,590 in the quarter ended 31 December amounting to Rs.9.49 crore compared with 1,327 cases amounting to Rs.4.93 crore in the preceding three months.
Considering these fraudulent activities, it has become even more important to pick a secure credit card. “Like you choose your toothpaste or your shampoo, you should also choose your credit card. People just buy a credit card become his/her bank is selling it. You should exercise your right to choose a financial product,” says Uttam Nayak, group country manager (India and South Asia), Visa.
Banks and other financial institutions sell hundreds of credit cards. It is impossible for a person to select the best card in the market. However, you can choose a secure card. How? Just ask your banker few questions before buying a credit card. Here are the five things that you need to ask your banker before accepting the card that they offer.
Most banks offer zero-liability policy on credit cards. However, the cover will vary from bank to bank. “We’ve zero liability for credit cards. Any fraudulent transaction after reporting loss of card will be covered. Customers need to inform immediately on the loss of card,” says Rajesh Kumar, senior executive vice-president, retail credit and risk, HDFC Bank Ltd.
Once you know that you will get zero-liability, ask if it is covered for stolen card or any kind of fraudulent activity. “In the US and most of the markets, zero-liability is mandated by the regulator. In India, though zero-liability is provided but still all facilities are not available as nobody is ready to pay a fee,” says Nayak.
Ascertain the number and amount of fraudulent transactions covered. Some banks cover transactions within five days prior to reporting whereas some do for three days. Some banks cover unlimited amount of transaction while others have a cap of Rs.10,000. A few banks ask you to pay the first Rs.5,000 lost and the rest is covered by them. So, there are multiple schemes available. The process of claim also varies from bank to bank. In case of any loss or fraud, your bank may ask you to give it in writing that you haven’t done it. Some may record your phone call.
RBI has asked all banks to provide chip-based cards if the card is used in a foreign land at least once. “Chip-based card is more secure as it is difficult to copy data from it compared with a magnetic-strip card,” says A.P. Hota, managing director and chief executive officer, National Payments Corp. of India.
This is true only for swipe purchase and not when you purchase online. However, there have been reports that chip-based cards also have been compromised. “This happens when the terminal set at a merchant outlet can read only magnetic-stripe cards (chip-based cards do have magnetic strip as of now). The terminal will use the magnetic strip to read the card. Now in case a fraudulent activity happens, the liability will fall on the bank through whose terminal the activity happened. So customer or the chip-based issuing bank is protected,” says Nayak.
As you have taken protection by opting for a chip-based card, the liability of fraudulent activity will not fall on you.
Factors of authentication
RBI has stated that banks should move towards a system that facilitates implementation of additional factor of authentication for cards. Multi-factor authentication is considered to be safer as the bank will also send a one-time password to your mobile phone and you can transact only if you key in the code that has been sent to you. However, some banks still don’t have this. For instance, HDFC Bank Ltd does not offer multi-factor authentication on all cards. Citibank gives you an option of multi-factor authentication or do a direct transaction. Axis Bank Ltd has put in place multi-factor authentication.
Blocking the card
In case of loss of card or fraudulent activity, the first thing that you should do is to block the card. All banks that offer credit cards provide the facility to block the card by calling the customer care helpline. But what happens if you are abroad or unable to contact the customer care? “HDFC credit card can be blocked through Internet banking. You can anyway call the customer care too,” says Kumar. RBI has stated that banks should provide easier methods such as text message to the customer for blocking card and get a confirmation to that effect after blocking the card.
RBI has also asked banks to frame rules based on the transaction pattern of the usage of cards by the customers in coordination with the authorized card payment networks for preventing fraud. Simply put, in case a bank sees a transaction happening in a geographical region which is unusual for the customer, they call the customer to validate whether he/she wants to do the transaction. American Express, based on the customer behaviour, calls the card user if they find any suspicious behaviour and also for big-ticket purchases.
Conclusion: There are other facilities such as buying an insurance policy, temporary credit which bank gives in case of fraudulent activity and provisional credit in case of dispute. However, if you ask these five questions before buying the credit card, your exposure to fraudulent activity will be lower.