subject: Credit Card Charge-Offs After Death: How Does it Work? [print this page] Credit Card Charge-Offs After Death: How Does it Work?
With the passing of an individual, his wealth gets transferred to his successors. It is the same case with ones liabilities. With consent from immediate family when he was alive, all his debt can get charged to them.
This is common, especially with credit cards. Usually, whatever is left on the departed's credit card debt is declared as 'charge-off'. It then gets transferred to the care of an immediate family through a collections agency.
However, as mentioned above, this cannot be done without prior consent when the person is alive. This is best exemplified through a joint account. With a joint account, two or more persons apply for credit cards to be conjugal owners. Each has equal rights regarding usage. Payment can be distributed amongst each other equally or they can take turns. In fact, it doesn't matter how it's done. Credit card providers only care that they get paid on time.
The moment the other owner passes away, the entire debt and account becomes the sole responsibility of the other account holder. This is advantageous for credit card providers as they won't completely have to lose what they lent. But not as much for the other owner. Albeit inherited, overdue accounts can be detrimental for ones credit score. Since the debt becomes the partners own, it is now considered as a factor to determine her credit worthiness. Naturally, late payments earn negative scores.
But one matter regarding charge-offs that confuses credit card users is authorized users. Authorized users are defined differently from joint account holders. The former is merely an extended user that does not own the credit card account. However, he or she has the right to charge, with the owner's consent, for a specified amount.
Unfortunately, there are a plethora of cases where in authorized users get charged with a departed's debt. Commonly, it is done by debt collection agencies and other credit card providers. But as per explanation of American Express, they have in their policy to never charge a mere authorized user to inherit overdues. But for providers Chase and Citibank, their explanation on this matter is still unclear.
People who get charged with overdue accounts can expect a lowered credit score. However, credit bureaus have made it clear that this can be disputed. Clearly, those collection agencies who have bought the debt and abusive credit card providers are out looking for someone to blame. But it's high time that credit card users get informed of this matter. If they are not joint holders, they cannot be charged consecutively.
