Steps to Take When a Cardholder Dies
After a loved one’s death, a lot of responsibilities can fall upon his/her next of kin.. One may have to take care of his/her estate, pending loans (if any) and execute the individual’s will. Also, if that person was a credit card holder, that too needs to be taken care of.
Learn in this blog what happens to a credit card after its holder’s death and what necessary steps one can take in that situation.
What Happens After a Credit Card Holder’s Death in India?
Legally, when a person dies, all his/her debt does not disappear. They need to be paid back. Similarly, when a credit cardholder dies, the outstanding amount has to be paid back with the applicable interest and other charges to the provider.
This responsibility generally falls on the legal heir who is to act as an administrator of the deceased’s financial accounts. So, if your loved one, unfortunately, passes away leaving behind an outstanding credit amount, as their heir, it is your responsibility to honour that debt.
Now, due to a certain situation, if you cannot fulfil it, banks have the right to issue a civil lawsuit for credit recovery. Under such circumstances, the pending amount will be adjusted from the deceased’s estate. Moreover, as the legal heir, you cannot inherit that person’s estate as long as the debt is outstanding. Therefore, under such circumstances, experts always suggest settling such obligations at the earliest.
Please note that any survivor or living relative of the deceased does not inherit the credit card debt. However, they may still get calls from the card provider asking them to make the payment. Only if they were joint cardholders with the deceased, the liability to pay the outstanding amount will fall on them.
Steps to Take After a Credit Card Holder’s Death
In case your loved one dies leaving an outstanding credit amount, these are the steps you can take:
Step 1 – Inform the Credit Card Issuer
The first step you should take under these circumstances is to inform the credit card issuing company of the situation. This will help to close the credit card account and accumulation of finance and interest charges on the outstanding amount will get paused automatically. You may have to provide a death certificate as official proof.
Apart from this, you also have to request all the credit bureaus for a credit freeze. This step is crucial to prevent the deceased’s identity theft. There are various instances where individuals use the identity of a deceased person to commit credit card fraud in his/her name. Moreover, you should also consider notifying the deceased’s financial partners, if any.
Step 2 – Stop Using the Credit Card
After the holder’s death, it is essential to stop using his/her credit card. This is because, even if you are the legal heir, you have no legal right to do so and it may be deemed as fraudulent activity. In addition, this can attract legal problems.
Step 3 – Seek Assistance from the Credit Issuing Company
There are various instances when a joint cardholder dies leaving behind a spouse who has no income. Under such circumstances, you can contact the card provider and ask for assistance. You can request them to revise the payment terms for a brief period of time until the situation gets under control.
In addition, if the deceased had a life insurance policy that is liable to pay a death benefit, you can ask the card issuer to wait till then and settle the outstanding amount as soon as the funds arrive.
Step 4 – Take Counsel from an Attorney
After the death of a loved one, it can get quite confusing as to who is legally obliged to pay off the deceased’s debt. In such a situation, it is always advisable to consult with a good attorney to resolve the situation. There may be certain state laws that require you to wait for a certain period of time before receiving financial benefits from the deceased’s estate.
Thus, if you are waiting for the inheritance to pay off your loved one’s outstanding credit amount, taking the help of a lawyer may be a good idea. Moreover, he/she can inform you about your legal rights while dealing with debt collectors and ensure that all things are settled properly.
These were some of the steps that you can take when your loved ones die with an outstanding credit amount. Moreover, if you are the legal heir, it is advisable that you organise the deceased’s financial documents and keep multiple copies of his/her death certificate. You may need to provide them to the card issuer, life insurance company and other authorities as per the situation.
Frequently Asked Questions
Is the spouse responsible to pay the deceased’s outstanding credit amount?
According to Indian law, the spouse is not liable to pay the deceased’s outstanding loan amount. However, if that person inherits the deceased’s estate, he/she becomes the legal heir and becomes liable for credit repayment.
Is there a death benefit for credit cards?
Some issuers offer credit card insurance plans. In case the holder dies in an accident, there is a provision to waive a maximum amount of ₹50,000 from the outstanding amount. However, this threshold is subject to change across providers.
How to claim credit card insurance?
You can claim credit card life insurance by submitting all the required documents like the death certificate, an FIR of the accident case, hospital reports, post-mortem reports and more. These documentation requirements may change across card issuing companies.
Will my credit score get affected by availing credit card insurance?
Credit card insurance is a benefit that is offered by some banks. Therefore, opting for such plans will not affect your credit score.