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What Happens to Credit Card Debt When You Die?

By Jason Steele · March 18, 2022 · 6 minute read

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What Happens to Credit Card Debt When You Die?

If you have credit card debt, you may have wondered, what happens to credit card debt when you die? When you die, your credit card debt does not die with you. Rather, any remaining debt you have must be paid before assets are distributed to your heirs or surviving spouse. The debt is subtracted from your estate, which is the sum of your assets. If your debts exceed your assets, then your estate is considered insolvent.

Read on to learn what happens to credit card debt after death, including who is responsible for credit card debt after death and what steps you should take after a cardholder dies.

Who Is Responsible for Credit Card Debt When You Die

An unfortunate part of understanding how credit cards work is grasping who is responsible for credit card debt after death. Typically, relatives aren’t responsible for paying a family member’s credit card debts upon death.

However, you may be responsible for paying your deceased loved one’s credit card debt if you cosigned for a credit card, given the responsibility cosigning carries. Joint account holders also can be held responsible for credit card debt left after death since both account holders are equally responsible for paying the credit card balance.

Authorized users, on the other hand, are not usually responsible for the outstanding balance on a deceased person’s account — unless, that is, you live in a community property state. These states, which typically hold spouses responsible for each other’s debts, include:

•   Arizona

•   California

•   Idaho

•   Louisiana

•   Nevada

•   New Mexico

•   Texas

•   Washington

•   Wisconsin

If you live in one of these states, you may have to pay your spouse’s credit card debts if they die, even if you were only an authorized user on their card.

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Next Steps After a Cardholder Dies

If you have a relative or loved one who recently passed and left outstanding credit card debt, theses are the steps you should take to make sure their debt is properly handled:

1.    Ask for multiple copies of the death certificate. You’ll likely need to send official copies to various credit card companies and life insurance companies. It may also be needed for other estate purposes.

2.    If you’re an authorized user on the deceased person’s credit card, stop using that card upon their death. Using a credit card after the primary cardholder’s death is considered fraud. If you make any payments on the authorized user card, the credit company will accept the credit card payments and can claim that you have taken responsibility for the entire balance of the card. If you don’t have another credit card of your own, you may want to explore how to apply for a credit card.

3.    Make a list of the deceased person’s financial accounts, including their credit card accounts. A spouse or executor of the deceased can request a copy of the person’s credit report to check for all accounts. This way, you’ll know which accounts you’ll need to handle.

4.    Notify the credit card companies of the death. You’ll want to make sure to close any accounts that were in the deceased person’s name.

5.    Alert the three consumer credit bureaus of the death. You’ll also want to put a credit freeze on the person’s account. This can help prevent identity theft in the deceased’s name. Only the spouse or executor of the estate is authorized to report this information to the credit bureaus, which include Experian, TransUnion, and Equifax.

6.    Continue to make payments on any jointly held credit cards that you aren’t closing. Making the credit card minimum payment can help prevent a negative effect on your credit score.

Assets That Are Protected From Creditors

If a deceased relative’s credit card debt exceeds their total assets, don’t panic. In the instance the estate doesn’t have enough money to cover all of the deceased’s debt, state law will determine which debt is the highest priority.

Credit cards are considered unsecured loans, which are lower in priority for loan repayments after death. Mortgages and car loans are secured by collateral, so they are considered higher priority. Often, unsecured debt may not even get paid.

It’s also important to know that some types of assets are protected from creditors in the event of death. This includes retirement accounts, life insurance proceeds, assets held in a living trust, and brokerage accounts. Homes may also be protected, though this will depend on state law and how title to the property is held.

Remember: Credit card companies can’t legally ask you to pay credit card debts that aren’t your responsibility.

Credit Card Liability After Death

The best way to keep your loved ones from having to deal with your credit card debt is to responsibly manage your credit card balances while you’re alive. For instance, you can avoid spending up to your credit card limit each month to make your balance easier to pay off. You can also take the time to look for a good APR for a credit card to minimize the interest that racks up if you can’t pay off your balance in full each month.

Knowing your credit card debt won’t disappear after you die may also make you think twice before making a charge. For instance, while you can technically pay taxes with a credit card, it might not be worth it if it will just add interest to the amount you owe.

If a loved one has recently passed and you shared accounts in any way, keep an eye on your own credit reports and credit card statements. Make sure to dispute credit card charges that you think are incorrect.

How to Avoid Passing Down Debt Problems

If you want to avoid passing down the issue of sorting out your debt, you can have an attorney create a will or trust. A will or trust will offer your loved ones guidance on where you’d like your assets to go after your death, and, in some cases, could allow them to bypass the sometimes costly and time-consuming process of probate.

However, making a will or trust won’t necessarily stop debt collectors from contacting your family members after your death — even if those family members aren’t responsible for the debt. Keep in mind that the Fair Debt Collection Practices Act does prohibit deceptive and abusive contact by debt collectors, so your loved ones will have some legal protections from excessive collections efforts.

Still, it’s important to share as much information as you can about your debt with family members so that they’re aware of your finances after you are no longer there. You don’t need to share information as personal as the CVV number on your credit card or your credit card expiration date, but it is helpful for your loved ones to have an idea of how many accounts you have and what the general state of them is.

The Takeaway

Unfortunately, you don’t get automatic credit card debt forgiveness after death. While your loved ones generally won’t be held responsible for your debt — unless you have a joint account, served as a cosigner, or live in a community property state — your debts are still deducted from your estate. If you want to avoid leaving your loved ones with a mountain of debt, the most important step you can take is to responsibly manage your credit cards while you’re still here.

Having a credit card that aligns with your financial habits is a key part of setting yourself up for success when it comes to credit cards. If you’re looking for a credit card that’s a better fit for you, consider applying for the SoFi credit card. The card has no annual fee, which can make it easier on your wallet.

FAQ

Do I have to pay my deceased parent’s credit card debt?

You don’t have to pay your deceased parent’s credit card debt unless you were a cosigner on their credit card. If you were an authorized user on your parent’s credit card, you are not responsible for their debt.

Do credit card companies know when someone dies?

You should notify the credit card company when your close relative dies to close any accounts in their name. You should also notify the three consumer credit bureaus of the death to put a credit freeze on the person’s account to prevent identity theft.

Can credit card companies take your house after death?

Homes are usually protected from creditors in the event of death, though this does depend on state law and how the title of the property is held. In general, however, credit card companies usually can’t take your house after death.

Is my spouse responsible for my credit card debt?

Your spouse is not responsible for your credit card debt unless they were a cosigner on your credit card. If they were an authorized user on your credit card, they generally are not responsible for your credit card debt unless you live in a community property state. In these states, which include California, Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, your spouse may be held responsible for your credit card debt when you die, even if they were just an authorized user on your card.

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†SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS PROSPECTIVELY BASED ON MARKET CONDITIONS AND BORROWER ELIGIBILITY. Your eligibility for a SoFi Credit Card Account or a subsequently offered product or service is subject to the final determination by The Bank of Missouri (“TBOM”) (“Issuer”), as issuer, pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated. Please allow up to 30 days from the date of submission to process your application. The card offer referenced in this communication is only available to individuals who are at least 18 years of age (or of legal age in your state of residence), and who reside in the United States.

*You will need to maintain a qualifying Direct Deposit every month with SoFi Checking and Savings in order to continue to receive this promotional cash back rate. Qualifying Direct Deposits are defined as deposits from enrolled member’s employer, payroll, or benefits provider via ACH deposit. Deposits that are not from an employer (such as check deposits; P2P transfers such as from PayPal or Venmo, etc.; merchant transactions such as from PayPal, Stripe, Square, etc.; and bank ACH transfers not from employers) do not qualify for this promotion. A maximum of 36,000 rewards points can be earned from this limited-time offer. After the promotional period ends or once you have earned the maximum points offered by this promotion, your cash back earning rate will revert back to 2%. 36,000 rewards points are worth $360 when redeemed into SoFi Checking and Savings, SoFi Money, SoFi Invest, Crypto, SoFi Personal Loan, SoFi Private Student Loan or Student Loan Refinance and are worth $180 when redeemed as a SoFi Credit Card statement credit.

Promotion Period: The Program will be available from 10/1/22 12:01 AM ET to 12/31/22 11:59PM ET

Eligible Participants: All new members who apply and get approved for the SoFi Credit Card, open a SoFi Checking and Savings account, and set up Direct Deposit transactions (“Direct Deposit”) into their SoFi Checking and Savings account during the promotion period are eligible. All existing SoFi Credit Card members who set up Direct Deposit into a SoFi Checking & Savings account during the promotion period are eligible. All existing SoFi members who have already enrolled in Direct Deposit into a SoFi Checking & Savings account prior to the promotion period, and who apply and get approved for a SoFi Credit Card during the promotion period are eligible. Existing SoFi members who already have the SoFi Credit Card and previously set up Direct Deposit through SoFi Money or SoFi Checking & Savings are not eligible for this promotion.


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