Credit Card Debt After Death: If a user dies without paying the huge bill, will the family have to pay the money?

In today's era, credit cards have become an important part of our lives. It gives us the freedom of cashless transactions, arranges money immediately in difficult times, and also provides attractive offers on shopping. But amidst all these benefits, we often forget that a credit card is also a loan. It is kept in the category of an unsecured loan.

If the bill is not paid on time, heavy interest and a penalty are charged. But have you ever thought that if a credit card user has a debt of lakhs and he dies before paying it, then what will happen to that loan? Will that loan have to be repaid by his family, i.e., wife or children? Know what the rules of the bank are in this case.

Understand the biggest rule: Unsecured Vs Secured Loan.

To understand the answer to this question, first of all, you have to know the difference between 'unsecured' and 'secured' loans.

Unsecured Loan: This is the loan for which the bank does not take any guarantee or security (such as land papers, FD, or gold) from you. Credit cards and personal loans fall under this category.

Secured Loan: This is a loan against which you pledge some valuable thing to the bank. Such as a home loan (in which the house is mortgaged) and a car loan (in which the car is mortgaged).

What is the rule regarding an unsecured credit card?

More than 99% of the credit cards used in India are unsecured. The bank gives you the card after looking at your income, credit score, and payment history.

What does the rule say?

According to RBI rules, the responsibility of repaying the dues of an unsecured credit card is only that of the primary cardholder. If the cardholder dies, then the bank cannot legally put any pressure on any member of his family (wife, children, or parents) to repay the loan.

So how does the bank recover its money?

The bank does not waive the loan immediately. It follows these steps:

Recovery from the deceased's estate
The bank first finds out whether the deceased has any assets (such as money in the bank, FD, shares, property) in his name. If there is any property, then the bank claims to recover its dues from that property under the legal process.

Loan write-off
If there is no property in the name of the deceased, or the value of the property is less than the loan, then the bank has no other option. In such a situation, the bank has to show those credit card dues in its books as 'bad khata', i.e., written off.

Rules change in case of secured credit cards.
Secured credit cards are given to those people whose credit score is poor. For this, the bank gets a fixed deposit (FD) from the customer as a guarantee.

What does the rule say?

If the secured credit card holder dies and the bill is pending, then the bank does not have to worry. The bank liquidates that FD and recovers its entire outstanding amount.

In these situations, the family can be responsible.

There are some special cases where the responsibility of repaying the loan can fall on a family member:

Joint Credit Card

If the credit card is taken on a joint account, then after the death of one holder, the responsibility of paying the entire outstanding amount lies with the other surviving holder.

Supplementary/Add-on Card

If the deceased had gotten an add-on card made for a member of his family, then also the primary responsibility is to recover it from the deceased's estate. The add-on card holder is not personally responsible, unless something else is written in the agreement.

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