What happens to credit card bills if the cardholder dies? Who will the bank recover the money from? Find out what the RBI rules say..

In today's world, everyone is extensively using credit cards. Some people use them wisely, while others fall into a debt trap. 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's (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 trust them. Let's find out who will pay the outstanding amount if a credit card holder dies. And if the payment is not made, can the bank recover the money? If so, from whom?

Unsecured Loan Rules Apply

A credit card is considered an unsecured loan because the bank does not ask for any guarantee or security. You don't have to mortgage your house, land, gold, or anything else. Banks issue credit cards based on your income and credit score. 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 money?
Even though the credit card holder's family is not personally responsible for paying the outstanding amount, the debt doesn't completely 'disappear'. The bank uses the deceased person's assets to recover the debt. If the person had a bank balance, fixed deposits, shares, gold, or property, the bank legally claims 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 collect 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 property worth ₹5 lakh and the outstanding amount 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 waived?
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 then considers this debt a 'bad debt' or NPA (Non-Performing Asset) and writes it off.  Practically, this debt is waived 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 if 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 amount from that guarantor.

What should the family do after the cardholder's death?
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 deceased person's account, 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 and demands payment from your personal property, 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 it, but some premium credit cards include 'credit life insurance' coverage. In such cases, if the cardholder dies in an accident, the insurance company pays the outstanding balance. However, the maximum amount payable is predetermined. The family should definitely check the insurance clause that comes with the credit card.

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