Imagine that someone steals your credit card and charges hundreds (or, gasp!, thousands) of dollars on it. Are you sunk? Nope, you're only responsible for up to $50.
According to the Federal Trade Commission, by law consumers can't be held responsible for more than $50 if they are the victims of credit card fraud and report the theft promptly. To avoid paying more, contact the card company as soon as you notice that a card has been lost or stolen because you cannot be held responsible for any charges made after a card is reported stolen. Also, if a theft occurs involving the credit card numbers but not the actual card itself, then you're off the hook for any fraudulent charges.
In addition, be careful with "pre-approved" offers you receive in the mail. If you toss them out and a dastardly sort picks one up, he can change the address on it to his own and get a card in your name -- yet another way identities get stolen. It's not a bad idea to buy a paper shredder to destroy credit card offers and documents with confidential information. At office supply stores, you should be able to pick up a modest shredder for around $20 or $30. It's a simple way to help avoid the massive headache of identity theft. (This article on safeguarding your financial life has more great tips.)
So if you ever find yourself in the unfortunate position of credit card theft, jump on the phone and call your credit card company right away -- sometimes credit card companies won't even hold you responsible for any unauthorized charges. Don't panic, though, because you will only be responsible for $50 at most.
If you or someone you care about is mired in credit card debt, learn more in our Get Out of Debt area. And check our Credit Center, which is full of useful information about using your credit report, industry tricks, and preventing identity theft (just to name a few).
This article was originally published on Dec. 30, 2005, and has been updated by Foolish research associate Katrina Chan.