Credit & Debit Card Insurance – Is It Really Needed?

Credit & Debit Card Insurance

You are sitting at home and suddenly your phone goes off with messages from various websites and your bank about purchases made through your credit/debit card. Your heart stops for a moment seeing what is happening. Then you rush towards your wallet to check if you have all your cards. They are all there and still those messages keep on coming. You log on to Google for your bank’s customer care number. After calling your bank you find out that you have been a victim of card fraud. Someone who got hold of your card details had a merry day shopping. But you were smart and you had purchased card insurance. So you take a relaxing breath because you have nothing to worry about.

What if I were to tell you that purchasing card insurance was an expenditure that you really did not need? Think really hard because this is actually true.

A card insurance policy will charge you close to Rs 2,000 annually. It is not necessary that you will be a victim of card fraud if you take all the necessary steps to ensure that your information and passwords are confidential. Suppose after 10 years you did become a victim of it. By then you have already paid Rs 20,000 to the insurance company. Surprisingly, your liability even without card insurance is just Rs 10,000. So, Rs 10,000 of your hard earned money just left your pocket because of the scare tactics applied by the insurance company so that you could be fooled into purchasing card protection.

RBI has taken strict steps to ensure customer protection that limits the liability of the customers in case of unauthorized electronic banking transactions. For complete details straight from the Reserve Bank Of India, website click on the link given below:


Steps Taken by RBI for Customer Protection

A short summary of steps taken by the Reserve Bank Of India is as follows:

Ø  Zero Customer Liability

                A customer is not liable to bear any financial implications due to card fraud if:

ü  The fraud occurred as a result of negligence, fraud or deficiency on part of the bank. In such a case it does not even matter if the transaction was reported by the customer.

ü  The breach occurred from a third party and the fault lies neither with the bank nor with the customer. The problem here is somewhere in the system. But such a transaction needs to be reported, by the customer, to the bank within 3 working days.

Ø  Limited Customer Liability

                In some cases, the customer will be held liable. But their liability is limited. These cases are:

ü  If the customer was negligent or shared his or her payment credentials with anyone then the customer will have to bear the entire loss until the unauthorized transaction is reported to the bank. Post the reporting of such a fraud all losses shall be borne by the bank.

ü  Neither the bank nor the customer was at fault but the problem was somewhere in the system. The customer failed to take any action by reporting to the bank even after 4 to 7 working days of receiving such a notification from the bank. The liability of the customer shall be restricted to the transaction amount or the amount mentioned below (whichever is lower):


Type Of Account

Maximum Liability in INR

Basic Savings Bank Deposit Account


ü  All other Saving Bank Accounts

ü  Gift cards and pre-paid payment instruments

ü  Current/Cash Credit/Overdraft accounts of micro, small and medium enterprises

ü  Current Accounts/ Cash Credit/ Overdraft Accounts of Individuals with annual average balance (during 365 days preceding the incidence of fraud)/ limit up to Rs.25 lakh

ü  Credit cards with limit up to Rs.5 lakh






ü  All other Current/ Cash Credit/ Overdraft Accounts

ü  Credit cards with limit above Rs.5 lakh



Things To Keep In Mind

«  Never share your card details with anyone especially the CVV number or the Card Verification Value.  

«  It is mandatory to register for SMS alerts and whenever possible then for email alerts as well. Make sure that your current mobile number is always updated in bank records for your own financial safety.

«  In case of an unauthorized transaction from your card, immediately report to the bank.

«  When the fault does not lie with either the bank or the customer but somewhere in the system the customer’s liability will vary. It will depend on the number of days taken by the customer to report the fraud to the bank.

Time Taken By Customer To Report The Fraud To Bank

Customer Liability

Within 3 working days

Zero Liability

Within 4 to 7 working days

The transaction value or the amount mentioned in the table above, whichever is lower

Beyond 7 working days

As per bank’s Board approved policy

The number of working days shall be calculated as per the working schedule of the customer’s home branch. However, it excludes the date of receiving the communication.

Burden Of Proof

In all this, the burden of proving whether the customer was liable for the unauthorized transactions lies with the bank. The customer is innocent until proven guilty by the bank.

What To Expect From Bank After Notification

Once the bank is notified they shall credit (shadow reversal) the amount that was involved in the fraudulent electronic transaction to the customer’s account. This has to be done within 10 working days of receiving the communication from the affected party or the customer.

Furthermore, in case of any complaints the bank has to resolve them within 90 days of receipt of the complaint. Once the complaint is resolved the customer is compensated as per the points mentioned above.

If the complaint remains unresolved even after the completion of 90 days, the customer is compensated in the same manner as mentioned above.

Finally, in case of debit card fraud, the customer does not suffer the loss of interest. And in case of credit card fraud, the customer does not have to bear any extra burden of interest.

Food For Thought

Next time a little presence of mind will itself save you from an undue expenditure of purchasing card insurance. Also, remember if you are at fault, even the insurance company will not come to your assistance. So, if being careful is the only option then why spend your hard earned money to be so?


P.S. Although this post is India specific the story is true for any country. Your respective governments have a policy in place to protect the customer interests when it comes to card frauds. 

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