What happens to my credit card debt when I die?

No-one wants to leave their family and friends to deal with their debt after they die, but there are many misperceptions about what actually happens to borrowed money when you’re no longer around. In fact, in Australia, what happens to a credit card debt when you die is something that many people wonder. 

A credit card is a form of unsecured debt, which means that it isn’t easy for the bank to sell something to claw back the money it’s owed. That doesn’t mean the debt will be forgotten, though.

The two main scenarios where you may be required to pay for a deceased person’s credit card debt are:

• If it is a joint credit card attached to your name
• If you went guarantor on the credit card application 

There are several ways credit card debt can be repaid after you die, including from your estate or other accounts. If the credit card and savings bank accounts belong to the same bank, then the bank may use money from the savings account to settle the credit card debt. If there isn’t enough in the savings account, the lender may write-off the amount or claim it from the credit card insurance if you had it. 

Ultimately, unless there are special circumstances - such as a very small balance - the debt on the credit card needs to be settled, whether the person is dead or alive.

Credit card debt paid from the estate

The death of a loved one can be a traumatic event, and to add to the stress, there are practical concerns that need to be dealt with. Understanding what happens to your credit card debt when you die can sometimes help to be prepared - whether it’s you preparing for the end or preparing to lose a loved one.  

Usually, after someone dies, an executor is appointed to manage the Will. It is the executor’s responsibility to manage the winding up of your estate, which includes repayment of debts. Funds from other parts of the estate - such as property sales or superannuation - can be used to pay off credit card debt. 

As a general rule, nothing can be paid out of the estate (such as inheritance) until debts have been paid. 

Given the estate takes care of debt if all else fails, family members do not usually have to pay for loved ones’ credit card debt. There are some exceptions, such as if they are a co-signer on the card.  

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