What happens to credit card bills if the cardholder dies? Learn what the RBI rules say.

A credit card falls under the category of an 'unsecured loan,' meaning there is no collateral pledged against it. If the credit card holder dies, legally, their family members are not personally responsible for paying the bill. The bank cannot force the family to pay from their own pockets. However, the bank has the right to recover its dues from the deceased's assets, bank balance, or investments. If the deceased has no assets, the bank ultimately has to 'write off' the debt.

Nowadays, everyone is using credit cards extensively. Some use them wisely, while others get trapped in a debt cycle. If credit card dues are not paid on time, you can face heavy penalties and interest charges. Have you ever wondered what happens if a person dies and has outstanding credit card debt?

This is a question whose answer requires understanding the Reserve Bank of India (RBI) rules. If you search for answers to such questions on social media and the internet, you will find many different answers, but don't rely on them. Let's find out who will pay the outstanding credit card debt if a credit card holder dies? And if the payment is not made, can the bank recover the dues? If so, from whom?

Unsecured Loan Rules Apply

A credit card is considered an unsecured loan because the bank does not take any guarantee or security from you. You don't have to mortgage your house, land, gold, or anything else. The bank issues you a credit card based on your income and credit score. Therefore, according to RBI rules, the person who took the loan or credit card is responsible for this type of loan.

This means that if the credit card holder dies, the bank cannot force their heirs or family to pay the money. They are not obligated to pay from their personal savings or assets.

So how does the bank recover the dues? Even though the credit card holder's family may not be personally responsible for paying the outstanding balance, the debt doesn't simply "disappear." The bank will try to recover the debt from the deceased person's estate. If the person had a bank balance, fixed deposits, shares, gold, or property, the bank will legally claim the outstanding amount from these assets first.

When can recovery be made from the heir?

Now, the question arises: what happens if the deceased person's assets are inherited by their heir? In such cases, the bank can recover the outstanding credit card bill from the heir, but the condition is that the heir is only obligated to pay up to the amount they inherited. For example, if the heir inherited assets worth ₹5 lakh and the outstanding balance is ₹7 lakh, the bank can only recover ₹5 lakh from the heir. The remaining ₹2 lakh will have to be written off by the bank.

When is the debt forgiven?

If the deceased person has no assets and no money left in their bank accounts, the bank has no way to recover the debt. In such a situation, the bank has to write off the outstanding amount. The bank considers this debt a "bad debt" or NPA (Non-Performing Asset) and writes it off. Practically, the debt is forgiven because there is no legal source available to repay it.

Rules are different for joint holders and guarantors

If the credit card is a joint account or someone has guaranteed the card, the rules change. In the case of a joint card, after the death of one person, the other person is responsible for paying the outstanding balance. Similarly, if someone signed as a guarantor when the card was issued, the bank can recover the debt from that guarantor.

What should the family do upon the death of the cardholder?

As soon as a credit card holder dies, the family should inform the bank as soon as possible. This will prevent the bank from continuing to charge interest and penalties on the card. The bank will also block or freeze the account of the deceased person, preventing any further transactions or charges. Submit the death certificate to the bank as soon as possible.

What to do if a recovery agent comes to your house?

If a recovery agent threatens or intimidates you into paying the bill from your personal assets, you can file a complaint with the police. You can also file a complaint with the RBI Ombudsman.

Does insurance help?

Not all credit cards offer this, but some premium credit cards come with 'credit life insurance' coverage. In such cases, if the cardholder dies in an accident, the insurance company pays the outstanding amount. However, the maximum amount payable is predetermined. The family should definitely check the insurance clause that comes with the card.

Conclusion

In short, the credit card bill dies with the deceased, provided they haven't left behind any assets from which the bank can recover the debt. The family doesn't need to panic because the bank cannot claim your personal home or jewelry unless they are in the deceased's name. Be vigilant and follow the legal process to avoid undue pressure from the bank.

Frequently Asked Questions (FAQs)

1. Can the bank deduct money from the deceased's children's salaries?
No, the bank cannot touch the personal income or assets of the children or any other family member.

2. What happens if the deceased has no heir?
In such a situation, the bank writes off the loan under its internal process and considers it a loss.

3. Does interest accrue even after the card is blocked?
Interest calculation should stop after the bank is notified of the death and the card is blocked. If the bank still charges interest, you can file a complaint.

4. Is the add-on card user liable to pay the bill?
No, the add-on user is only a user of the card; the legal responsibility for the debt remains with the primary cardholder.

5. What to do if recovery agents harass you?
You should immediately complain to the bank's nodal officer or file an online complaint at cms.rbi.org.in.