What Happens to Credit Card Debt When You Die?

Worrying about your estate and planning for the future is important. Credit card debt is common, and you might be worried that your spouse or children will be saddled with your debt should something happen to you before it’s paid off.

When you die with credit card debt, your estate may have to repay some of the debt, but your heirs usually won’t. 

Who Is Responsible for Credit Card Debt After Death?

It’s illegal for debt collectors to say your friends and family are responsible for a debt they don’t owe. It is legal, however, to ask them to pay voluntarily. So if your loved one has recently died or you’re worried that someone else will have to pay your credit card debt, it’s important to know the rules of the Fair Debt Collection Practices Act. 

Almost all credit card debt is unsecured. That means a credit card company can’t take an asset that belongs to you if the debt remains unpaid. When you die, a probate court might decide how to distribute some of your assets, and that’s where credit card companies can go to try to be paid back. If you have cash in checking or savings accounts, then credit card companies may be able to take some of it to pay off any remaining credit card balances.

There are three big exceptions: joint accounts and accounts of married people in community property states.

Joint accounts, co-signed accounts, and community property states

Joint accounts, co-signed accounts, and accounts in community property states are treated differently.

Joint accounts are accounts that have more than one owner. If you have a joint credit card account, your co-owner could be responsible for paying back credit card debt when you die. The same applies to co-signed credit card accounts—which are pretty rare today. Someone who co-signs an account isn’t a co-owner, but they agree to take responsibility for the debt if you don’t pay.  These might be credit cards for college students or for people with lower credit scores or a shorter credit history. If your account has a co-signer, then they’ll still be liable for paying off your debt after you die. 

If you have a co-signer on your credit card, you can check with your credit card company a few times a year to see if your credit score has improved enough to remove the co-signer.

Accounts owned by married people in community property states are also treated differently. Those states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Wisconsin, Texas, and Washington. Generally speaking, in those states credit card debt that you take out after getting married is the responsibility of both spouses. 

So if your spouse is still alive, they’re responsible for your credit card debt. That’s true even if they’re not an authorized user on your credit cards. However, they typically wouldn’t be on the hook for debt you incurred before marrying.

Is an authorized user responsible?

If someone makes you an authorized user on their personal credit card and then dies, you’re not responsible for their credit card debt unless you’re a co-signer on the account or married to them in a community property state.

But as soon as you learn the person has died, you should stop using the authorized user card. If you keep using an authorized user card after the account owner has died, you could even be charged with fraud.

Are family members responsible for deceased credit card bills?

Except for spouses in community property states, co-signers, and joint owners, family members aren’t responsible for credit card bills after someone dies.  

Instead, the estate handles those bills. If the estate doesn’t have enough money to pay them off, then no one else has to pay them. Your beneficiaries wouldn’t receive an inheritance, but they also won’t have to repay your credit card company.

Is the beneficiary or the executor responsible for debt?

The executor, also called a personal representative or administrator, of a dead person’s estate handles telling their creditors the account owner has died, finding out how much the estate owes each creditor, and telling the creditor where and how they can provide evidence of the debt.

Life insurance policies, retirement accounts, and living trusts are usually not treated as part of a person’s estate, so credit card companies can’t go after the beneficiaries of those accounts unless the beneficiary is also a co-signer on the account, or a surviving spouse in a community property state.

Four Steps to Take After a Cardholder Dies

1. Stop using authorized user cards immediately.

2. Notify each credit card company separately to tell them the cardholder has died.

3. Contact any one of the three major credit bureaus so that the cardholder’s credit report can be frozen. (The credit bureau you contact will automatically notify the other two bureaus.)

4. If you’re a co-signer, joint owner or surviving spouse in a community property state, try to make payments on the account to avoid late fees, penalties, and interest charges, or negative marks on your credit report.

Which Assets are Protected After Death?

After you die, many of your assets may be transferred to heirs without becoming part of your estate. That means your assets may already be more protected from credit card companies than you think.

• If you have a life insurance policy, then when you die that will be paid out to your beneficiaries directly and isn’t considered part of your estate, unless you name your estate as a beneficiary on your policy.

• Retirement accounts like 401(k)’s and IRA’s are transferred directly to your beneficiaries, so credit card companies can’t go after that money.

• Irrevocable living trusts are another way to protect your assets from credit card companies after you die. They are more complicated to open than life insurance policies or retirement accounts, so you’ll want to consult a professional to get one set up properly in your state.

• When you make a Uniform Transfer to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA) account, that money already belongs to the beneficiary even if you still control it, so it won’t be part of your estate and credit card companies can’t go after it.

These accounts work best if you make sure the beneficiaries are kept up to date. For example, if you have a beneficiary who dies before you, and you forget to update your accounts, then the balance may become part of your estate and vulnerable to credit card companies. Log into your account online or call once or twice a year just to ensure your beneficiaries are up to date and still reflect your current wishes.