Are credit cards safe?

Quick insights

Credit card issuers offer different ways to help protect their cardmembers from fraud. And it’s for a good reason—according to a 2024 Federal Trade Commission report (PDF)Opens overlay, credit card fraud is one of the most common forms of identity theft.

From spending alerts to purchase protections, credit cards allow cardmembers to access security features that may help prevent unwanted purchases and protect their information. Read on to learn about some common protections and security features available when you make purchases with a credit card.

4 Common credit card protections

Consumers may have several protections when using their credit card to make purchases. These protections may include certain card safety features, like fraud monitoring, or federal law that provides liability protections for unauthorized purchases.

Some common credit card protections include:

1. Liability protections

Under U.S. federal law, specifically the Fair Credit Billing Act (FCBA), credit cardmembers are protected against unauthorized charges, with their liability limited to a maximum of $50. This protection means that if a cardmember promptly identifies and reports unauthorized transactions, they may not be responsible for more than $50 of those charges.

Additionally, some credit card issuers offer zero liability policies, waiving even the $50, provided the cardmember reports the unauthorized chares within a reasonable timeframe.

2. Fraud monitoring

Credit card companies may employ sophisticated algorithms and machine learning techniques to monitor transactions for patterns that can indicate fraudulent activity. These systems can analyze factors like the transaction location, amount, frequency and merchant type to identify irregularities from a cardmember's typical spending behavior.

When unusual activity is detected, the card issuer may send alerts or notifications to the cardmember, prompting them to verify the transaction.

Credit cards also provide detailed monthly statements, allowing cardmembers to review and identify any unauthorized or unusual charges. Cardmembers can also check their accounts online to review transactions in near real-time.

3. Dispute resolution

When cardmembers notice unauthorized transactions, they can initiate a dispute by contacting their credit card issuer. Upon receiving the dispute, the issuer typically begins an investigation to determine the validity of the claim.

During this process, many issuers provide provisional credit to the cardmember's account, temporarily restoring the disputed amount to ensure continued access to funds. This provisional credit remains until the investigation is concluded.

4. Purchase protection

Some credit cards offer purchase protection, which may cover items purchased with the card against damage or theft for a specific period after purchase, often up to 90 days. They may also provide extended warranty benefits, adding time to the manufacturer’s warranty on eligible purchases.

5 Credit card security features

In addition to providing protection for your purchases and fraudulent charges, your credit card may also have built-in security features. These are often included to make fraudulently obtaining your card information more difficult for scammers.

Some common credit card security card features include:

1. Alerts

Credit cards typically offer fraud alerts and may notify cardmembers of unusual purchases. Some cards may even offer 24/7 fraud monitoring. Many card issuers also allow cardmembers to set up alerts that can issue notifications if charges exceed a set amount or happen outside of a designated location.

2. Tokenization and encryption

Tokenization and encryption help to secure credit card transactions by transforming sensitive card information into unreadable formats. Tokenization replaces credit card details with a randomly generated “token” that cannot be traced back to the original data. This process can be common when using a credit card connected to a mobile device. Encryption scrambles the card information using complex algorithms, making it accessible only to authorized parties with the decryption key.

3. Virtual cards

Credit cards issuers may offer virtual credit cards for online purchases. Virtual cards are a digital representation of a traditional physical credit card. They mask your credit card's real information through tokenization. Some virtual cards can also be generated for one-time use, making it impossible to reuse the card.

4. Authentication

Credit cards may offer two-factor authentication for online purchases, adding an extra layer of security by requiring a verification code. Some credit cards offer biometric authentication, such as fingerprint or facial recognition, for accessing account information or authorizing transactions.

5. EMV chips

EMV chips are microprocessor chips embedded in credit cards. Unlike magnetic stripe cards, which store static data, EMV chips provide dynamic authentication. They help protect credit card purchases and information by generating a unique transaction code for each purchase, making it more difficult for fraudsters to use stolen data for counterfeit transactions.

Refunds and exchanges on credit card purchases

Credit card issuers often have a dedicated dispute resolution process, which might make it easier to resolve issues with merchants over unsatisfactory goods or services. Cardmembers may be able to leverage the credit card company's resources and support to mediate disputes with merchants, potentially leading to quicker resolutions.

If an item purchased with a credit card is damaged, defective or not delivered, cardmembers can initiate a chargeback, a process where the credit card issuer reverses the transaction to recover the funds.

Using a credit card vs. a debit card

Using credit cards instead of debit cards may offer advantages in terms of consumer protections and security. One key benefit is that credit cards are not directly linked to a personal bank account, which helps safeguard funds from being immediately withdrawn in the event of fraud.

In summary

Credit cards provide various protections and security features that may help safeguard against fraud and unauthorized transactions. Key protections may include liability limits and zero liability policies, along with advanced fraud monitoring systems.

Security features such as tokenization, encryption, EMV chips and virtual cards may help enhance transaction security. Additionally, some credit cards offer purchase protection and a dispute resolution process that may not come with other forms of payment.