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Who's responsible for your kids' unauthorized credit card charges?

Mobile transactions make it far too easy for kids to rack up unauthorized in-app purchases that surprise you with a large bill. Here's how to get a refund and protect your credit card from your children.

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If your kid often plays games on their smartphone or tablet, they may use your credit card to rack up in-app game purchases without your knowledge or approval. This can result in an unexpected and often hefty bill, as was the case when several parents filed lawsuits against Apple, Amazon and Google in 2014 after their children charged hundreds and thousands of dollars to their cards.

While many credit cards, such as the Citi Double Cash® Card (see rates and fees) and the Blue Cash Preferred® Card from American Express, offer zero liability and fraud protection — meaning you won't be held responsible for unauthorized charges — the lines are blurry when the unapproved purchases come from your child.

"All consumers are protected by federal law from unauthorized charges on their credit cards," Katie Ross, education and development manager at American Consumer Credit Counseling, tells CNBC Select.

"However, some credit card companies define 'unauthorized charges' as charges made after your card has been lost or stolen, meaning that if your kids make purchases on your card without your knowledge, you are still liable for the charges."

Below, we explain a few instances of kids charging excessive amounts of in-app game purchases to their parent's credit card without consent. Plus, we reveal how to get a refund for those charges and what you can do to protect your credit card from your kids.

Past lawsuits show that you could receive a refund

If you receive a surprise bill for your child's unauthorized credit card purchases, you're not alone. It would be far from the first instance of kids making expensive purchases on their smartphones or tablets without their parents' authorization.

In 2014, the Federal Trade Commission (FTC) filed several lawsuits against major corporations — Apple, Amazon and Google — that billed parents for millions of dollars for their kids' in-app game purchases that were made without consent.

In these complaints, parents cited that the companies didn't provide any warning that purchases could be made without requiring a password every time. When parents approved a one-time purchase and entered their passwords, most were unaware that their child could continue to make purchases for 15 to 30 minutes without additional authorization.

Thankfully, all three major lawsuits were settled, with the companies paying upwards of $19 million (Google), $32.5 million (Apple) and $70 million (Amazon) back to parents.

In the case against Apple, the company received tens of thousands of complaints from parents about their kid's unauthorized in-app purchases. Most notably, one kid spent $2,600 on in-app purchases for the game "Tap Pet Hotel."

As part of the settlement, Apple was required to modify its billing practices by making sure to receive consumers' explicit consent for current and future in-app charges and that the consent could be withdrawn at any time.

In the lawsuit against Amazon, parents also complained that they were unaware of in-app purchases and that there were no password requirements when Amazon initially rolled out in-app charges.

The FTC complaint also said Amazon encouraged children to make purchases by blurring the lines between what purchases charged virtual currency versus real money. And many parents stated their children couldn't read, yet were able to incur charges by clicking random buttons.

At the end of 2014, a case against Google rounded out a trend of FTC complaints about unauthorized in-app game purchases. Similar to the prior two cases, parents weren't aware of their children racking up Google Play charges ranging from 99 cents to $200 each.

If your child has made in-app game purchases without your knowledge, read on to learn how to get a refund in one of three ways.

How to get a refund for unauthorized charges made by your kid

If you find yourself with a bill for in-app game purchases or other items that you didn't authorize, don't think all hope is lost and you have to pay for it — you have options, which we explain below.

Here are the steps you'll have to take to get a refund:

  1. Contact the merchant.
  2. Dispute the charges with your credit card issuer.
  3. File a complaint with the FTC.

Step 1: Contact the merchant

The first step you should take is to contact the merchant.

"You might find the company's refund policy covers your situation or allows for refunds or cancellations within a certain time frame," Jason Adler, assistant director of the Federal Trade Commission's midwest regional office, tells CNBC Select. "You'd want to explain the circumstances to the seller and ask for a refund,"

If your kid purchased physical items and not virtual coins or other app-related charges, you will likely need to return the items first before you see a refund. If the item is nonrefundable or open, you'll likely need to contact the retailer and explain the situation.

However, there is no guarantee you'll receive a refund or even a reply at, so you may have to take further action, which we outline in the next two steps.

2. Dispute the charges with your credit card issuer

You can try to contact your card issuer and dispute the purchase, which may work.

"Credit card payments are protected by the Fair Credit Billing Act (FCBA), which allows you to dispute billing errors, which can include unauthorized charges, and temporarily withhold payment while the creditor investigates," Adler says.

There's no guideline in the FCBA that explicitly states that kids' charges are fraud — it's a gray area. However, if you didn't approve the charges and didn't add your kid as an authorized user, the charges are technically considered unauthorized, and you can argue that it falls under the FCBA.

Under the FCBA, you're only liable for up to $50 in unauthorized charges, but you'll need to write to the credit card company to take advantage of this protection. The FTC provides a sample dispute letter you can mail.

3. File a complaint with the FTC

If contacting the merchant or your card issuer doesn't work, you can file a complaint with the FTC online or by calling 1-877-FTC-HELP. "This allows the FTC to investigate and take action if necessary," Adler says.

Purchases that may not receive a refund

While the prior settlements show that history is in your favor, there is a situation where you may not receive a refund — if you added your child as an authorized user. Many card issuers allow you to add authorized users who are 16 or younger, granting them permission to charge purchases to your account.

Once you give your kid a credit card and you're the primary account holder, you'll be responsible for all charges they make, even if you didn't directly approve each purchase. That's because you technically gave authorization for any charges when you gave them a card.

You should set guidelines on authorized card use and educate your child about credit cards in order to safeguard from unapproved purchases, which we explain below.

How to protect your credit card from your kid

In order to get ahead of potential unauthorized charges made by your kid, follow these steps to protect your credit card.

  1. Remove saved payment information: When possible, you should remove saved payment information from sites that let you save billing info for a faster checkout. This typically can't be done for app stores that require a card on file, but can be done on many shopping sites.
  2. Enable passwords and parental controls: If you share devices or accounts with your children, set up password requirements for every purchase, every time. Also take advantage of parental controls that may allow you to turn off purchases for kid's accounts.
  3. Educate your children: You should start teaching your children about credit as young as 3. This can help establish healthy relationships with money and allow them to understand how making purchases and paying for bills work.
  4. Set guidelines for authorized card use: If you decide to add your kid as an authorized user, create clear guidelines on what purchases are allowed and how much they can spend. Card issuers may allow you to set limits on authorized card use and alerts when transactions exceed a certain dollar amount.

If you follow the actions above, you can get ahead of your kid's potential unauthorized credit card charges.

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For rates and fees of the Blue Cash Preferred® Card from American Express, click here.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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