What happens to outstanding credit card debt if the cardholder dies? Learn the rules.

Credit cards: Thanks to rewards, cashback benefits, and discounts, credit cards are becoming increasingly popular, especially among young people. Once you get used to them, it's hard to give them up.

Credit cards:  People are using credit cards extensively these days. You'll find two or three credit cards in almost everyone's wallet. Credit cards are also popular because they are an easy way to access quick funds.

Top lenders like HDFC Bank, SBI, and ICICI Bank are providing credit card facilities to customers to meet various needs. The application process for these is digital and easy. Banks usually determine the credit card limit based on the borrower's income and credit score. With this increasing use of credit cards, have you ever wondered what happens to the outstanding amount if the cardholder suddenly dies? Who pays it off?

No burden is placed on the family

Generally, when a credit card user dies, the bank tries to recover the outstanding amount from their property or assets. If the deceased has any policies, investments, or property in their name, the bank legally recovers its dues from these. However, in the absence of these, no burden or pressure is put on the borrower's family because the responsibility of paying off the credit card debt rests solely with the cardholder. In such a case, if the cardholder dies, the debt is also extinguished. Furthermore, if the outstanding amount is more than the value of the borrower's assets or property, the lender considers the remaining amount as a bad debt or Non-Performing Asset (NPA).

What do RBI guidelines say?

RBI guidelines advise lenders not to resort to threats or harassment, whether physical or mental, against any person in an attempt to recover debt. This includes actions such as threatening, harassing, or invading the privacy of the credit card holder's family members, friends, or references. On the other hand, in the case of secured credit cards, such as FD-backed credit cards, lenders can recover the outstanding amount by selling the fixed deposit linked to the credit card.