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How to handle credit card debt after the death of a loved one

By Rajiv Raj
January 20, 2016 16:35 IST
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Obviously, you will feel at loss at times like this. In order to make your life a tad easier, here are some pointers on what needs to be done with inheritance of credit card debt.

A death of a loved one, like a parent or a spouse can leave you in excruciating pain and though the wound heals over time, the void remains irreplaceable. But what if you find yourself straddled with the credit card debt of your parent or spouse after the din of grief has died down? How do you cope with it? Read on to find out more.

Undoubtedly, the death of a family member is a time of immense pain and grief when you find that the world is crumbling around you. But the undeniable fact is that life goes on and you will still find yourself doing what you need to do to keep living.

After the initial bout of pain becomes a little better, there will be well-wishers in your family gently nudging you to look at the finances of the person who has passed, and you will be making an insurance claim and looking at other investments s/he has left behind.

But what if amid all this you find that you have inherited among other things, a substantial credit card debt?

If you are a joint card holder

If you have been a joint cardholder with your spouse or parent, the liability of debt obviously shifts to your shoulders, but since you have been using the card regularly, you are probably aware of the outstanding amount you owe to the issuer.

Nevertheless, make it a point to inform the credit card issuer, that is, the bank about the main cardholder’s death. You will be asked to furnish the death certificate and make an application for a fresh card if you wish to continue using the same account.

If you are not a joint card holder

If you are not aware of the existence of the card that your spouse or parent and are just surprised the debt s/he has accumulated, you need to approach the bank right away. If you are next of kin you still inherit the debt, but the bank on grounds of compassion may reduce the rate of interest or chalk out some easier repayment terms.

Also, in case you have received the benefits of the insurance policy that has been left behind for you, make use of the money to repay the debt as soon as you can and close the account.

Under no circumstances should you continue using the card, as it will not only enhance your debt, but you may be tracked down and accused of fraud, even if you are next of kin. Using the card without informing the bank about the death of the cardholder has criminal implications and thus you should be very careful.

For the cardholders: It pays to be prepared

If you are the sole credit card user, and your family does not know about the existence of your card, make sure that you use your card responsibly, so that you do not add on to the miseries of family with a pile of debt after your death. Follow the ground rules of credit card usage such as making timely repayments of your entire outstanding balance on your credit card and never buying anything on your card that you cannot afford to buy in cash.

Ideally you should have a co-cardholder like your spouse or your child who is old enough to use a credit card, so that there are no nasty surprises later. Also it is a prudent practice to keep your family updated about the state of your finances. Tell your family, or at least your spouse or the nearest family member you have about all your assets and liabilities.

Make a list of all your investments, insurance policies and all your credit in one place and let this family member know where you are keeping it. In fact, it is better to maintain a digital copy of such important documents and keep your spouse or adult child in the know. There are many cloud based safety deposit vaults that can take care of such important documents. All you need to do is to give your family member the keyword or the password of this digital safe that he or she can access after your death.

You love your family and will obviously do everything in your capacity to make life better for them. Maintaining good financial health and financial discipline with regards to your credit card will not only let you enjoy the convenience of using credit during your lifetime, but will ensure that your near and dear ones are not straddled with unmanageable debt after your death. 

Photograph: Images Money/Creative Commons

The author is a credit expert with 10 years of experience in personal finance and consumer banking industry and another 7 years in credit bureau sector. Rajiv was instrumental in setting up India's first credit bureau, Credit Information Bureau (India) Limited (CIBIL). He has also worked with Citibank, Canara Bank, HDFC Bank, IDBI Bank and Experian in various capacities.

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Rajiv Raj