Many families are unsure what happens if a loved one with a credit card passes away. Can banks recover the outstanding amount from the family? Here’s what the RBI guidelines and banking practices say.
1. Outstanding Credit Card Debt Is Part of the Estate
- According to RBI and banking norms, if a cardholder dies, the debt does not automatically vanish.
- The outstanding credit card balance becomes a liability of the deceased’s estate, not of individual family members (unless they are joint holders or co-signers).
- This means the bank can recover dues from the deceased person’s assets—like savings, fixed deposits, or property—before distribution to heirs.
2. Joint Account Holders or Authorized Users
- If the credit card had a joint holder or co-signer, the bank may hold them liable for repayment.
- Authorized users (family members who can use the card) are not liable for repayment.
- Tip: Always check your credit card agreement to understand liability clauses.
3. Insurance-Covered Cards
- Some credit cards come with insurance coverage for accidental death.
- In such cases, the outstanding balance can be cleared through the insurance payout, protecting the family from liability.
- Tip: Verify if your card has credit shield or life insurance benefits.
4. Required Steps for the Family
If a loved one passes away and had an outstanding credit card balance, the family should:
Inform the bank immediately with a death certificate.
Provide details of the estate and any joint holders.
Avoid using the card after the cardholder’s death—unauthorized use can cause legal complications.
Coordinate with the executor of the estate to settle dues from assets.
5. Key RBI Guidelines
- Banks are required to treat the outstanding debt according to the deceased’s estate.
- They cannot arbitrarily claim funds from family members who are not joint holders.
- Any recovery must follow legal procedures and estate settlement laws.
Bottom Line
- Outstanding credit card debt must be cleared from the deceased’s estate, not automatically from family members.
- Joint holders or co-signers are liable, but authorized users are not.
- Families should inform the bank immediately and explore options like insurance coverage or estate settlement to avoid complications.
Disclaimer:
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.
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