So you're dead: What happens to your credit card bills?

By Justin Boyle

I was over at the house of some friends a couple of weeks ago when an interesting subject came up: What happens with your credit accounts when you die? Can your unpaid credit card bills affect you or your family once you've departed this mortal coil?

The answer, it turns out, is complicated. It depends on the amount of your debt, the status of your estate, the contracts you have with your credit companies and a few other factors that might surprise you.

Your debt is your own

Typically, your spouse, relatives and descendants cannot be held liable for the debt that you racked up in life, according to the Federal Trade Commission (FTC). In other words, your credit history follows you to the grave, and no credit company or collections agency has the right to force your debt on anyone else.

Credit companies do have the right, though, to attempt to recoup what they're owed. When the value of your estate is calculated, credit card debt may be deducted from the balance before any money is released to your beneficiaries. If your debts outweigh your assets, whatever can't be collected from your estate is typically written off as a loss by the credit company.

An important caveat

It pays to be careful, though: Even though collections agencies don't have the legal right to force your debt on one of your surviving loved ones, some have ways of tricking the bereaved. They might call the house and attempt to insinuate that your family has some sort of moral responsibility to pay off your debt, or that paying off an uncollected debt is an ordinary part of settling the affairs of the deceased.

To avoid an antagonistic relationship with debt collectors, some consumer advocates say that relatives ought not to say anything to those who call about debts after a family member's passing.

Special circumstances

We've talked about joint credit cards before, and although there may be benefits to linking your finances with those of your spouse, post-mortem debt raises new questions.

In the unfortunate event that one member of a joint credit pair passes away, the balance on their shared card might end up being fully transferred to the surviving member. If the surviving member is just an "authorized user," however, rather than a full-fledged joint cardholder, they're not responsible for the debt of the deceased.

It's also important to note that rules and laws on the matter vary from state to state, and some states have community-property laws that might make surviving spouses responsible for the debts of the dead. There really isn't a catch-all answer to touchy situations like these, so don't make any concrete plans for your estate without consulting the local codes.

More unanswered questions

Now, what about some of the less tangible parts of your credit account? To put it bluntly, what about all those rewards you worked so hard to earn? Can you will your air miles to your kids?

The answer to this question is likely to lie in the service contract between you and your credit provider. Some cardholder reward programs allow you to transfer your points to other cardholders, or make special provisions for the transfer of accumulated rewards in the event of death.

Airline credit cards may also provide ways for points and miles to be transferred after death. Some airlines charge a fee for the transfer of large batches of miles, but most carriers make some sort of allowance for the "inheritance" of rewards that were earned in life.

Of course, there's no great need to worry yourself sick about the knotty world of posthumous debt resolution. Spend responsibly on credit and you'll likely avoid any undue stress on your estate or your descendants after you've gone on to your great reward.

After all, death and debt are each scary enough on their own. There's no sense in letting them team up on you.