Nowadays, the trend of credit cards has increased so much that you will find one or two cards in every pocket. Especially in big cities, the demand for credit cards is skyrocketing among the youth.
This card is useful in times of need but it also brings with it the burden of debt. Once you get addicted to credit cards, it becomes difficult to get rid of it but have you ever thought that if the credit card user suddenly dies, then who will pay his outstanding debt? Come, let us tell you what the law says in this situation and how the rules of banks work.
Credit Card: Necessity or Habit?
A credit card is a plastic card that looks similar to a debit card. You withdraw money from your bank account using a debit card, but you spend money borrowed from the bank using a credit card. You have to repay this loan later. In today’s era, everything from shopping, bill payment, and traveling has become easy with a credit card, but if it is not used carefully, it can trap you in a debt trap.
However, in difficult times, a credit card is no less than a lifesaver. Banks and credit card companies give you a grace period, that is, if you pay the entire dues by the last date of bill payment, then no interest is charged, but if you miss the grace period, then you may have to pay a huge interest on a small loan. This is the reason why it is very important to use credit cards wisely.
What happens to the debt after death?
Most credit cards fall under the category of unsecured loans. This means that the bank gives you this card on the basis of your income, credit score and previous loan repayment record. For this, you do not have to keep any guarantee or collateral (like property or jewelry). But the question is, what will happen to the loan if the unsecured credit card holder dies?
According to the law, if a credit card user dies, his debt usually ends. That is, this burden is not put on the family members. The responsibility of paying the credit card dues lies only with the cardholder. However, the bank first tries to recover the dues from the deceased’s estate. If there is any property, bank balance, or investment in the name of the deceased, then the bank can legally withdraw its money from it.
But if there is no property or money in the name of the deceased, then the last option available to the bank is to write off the loan. That is, the bank bears that loss itself. In such a situation, the family members need not worry, because the loan of unsecured credit card does not fall on them.
Rules are different for secured credit cards
In such a case, the case of secured credit card is a little different. This card is given to those people whose credit score is low or whose income is not stable. In such a case, the bank asks for some guarantee before giving a secured credit card, such as fixed deposit (FD). If the cardholder dies, the bank first recovers the outstanding loan from his FD. If there is more money in the FD than the outstanding amount, then the remaining amount is returned to the heir of the deceased.
In a secured credit card, the loan is not waived off because the bank has already taken a guarantee of its money. So if you are taking a secured credit card, then keep in mind that your FD is the security for the bank.
Take these precautions while using credit card
Using a credit card is as easy as it can be risky. If you keep some things in mind, you can avoid the debt trap.
1. Pay the bill on time
It is most important to pay the credit card bill on time. If there is a delay, not only the interest increases, but your credit score can also deteriorate. This may cause you problems in getting a loan from the bank at the time of need.
2. Do not pay only the minimum amount
Many people think that just by paying the minimum due amount, the work will be done. But by doing this, the loan gets prolonged and the burden of interest keeps increasing. Try to pay the entire dues in one go.
3. Keep an eye on your credit limit
Avoid spending close to or more than the credit card limit. This can spoil your CIBIL score, which affects your chances of taking a loan in the future.
4. Avoid withdrawing cash
Withdrawing cash from a credit card can be costly. Interest starts accruing on it immediately and additional charges are also levied.
5. Don’t convert every purchase into EMI
By choosing EMI repeatedly, the burden of debt gradually increases. Choose the EMI option only for important and big purchases.
6. Don’t get carried away with reward points
Spending too much in greed for reward points and offers can spoil your budget. Buy only what you need.
7. Do not keep too many cards
There is a risk of forgetting payment and due date by keeping many credit cards without need. Also, one has to pay annual charges for each card.
8. Be sure to check the statement
Do not make payment without reading the statement. This can help you avoid wrong charges or fraud. Check your credit card statement carefully every month.
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