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Is authorized user liable for deceased's card balance?

By

Opening Credits
Columnist Erica Sandberg
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.

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Question for the CreditCards.com expert Dear Opening Credits,
What happens if you are an authorized user on a family member's credit card and they pass away? Will you be responsible for the balance on said card? If not, what happens to the balance? What will it do to my credit score?  -- David 

Answer for the CreditCards.com expert Dear David,
I always like to equate authorized users to honored house guests. As such, you have welcome access to another person's credit card account. Essentially, you can enjoy the same charging privileges as the owner, but you don't have any of the legal responsibilities to the credit card company.

But before I explain what will happen to an unpaid balance and your credit score if that account owner dies, I'd like to give you a little background on how these arrangements work. This way you can have some context on why you would or would not be affected in such a circumstance.

In the beginning, a person applies for a credit account, offering up his or her personal and financial information for the credit card company to assess. If the company believes the applicant would be a good customer, the account is approved. The applicant gets a credit card with a specific spending limit, interest rate and other key lending terms. That person is now the sole owner of the account, and all activity is recorded on his or her consumer credit report. It is up to that individual to treat the account well by charging and repaying responsibly. If the cardholder runs up a bill that goes unsatisfied, the issuer has every right to pursue legal action or send the account to collections. 

Many creditors allow the account owner to also add friends or family members to the account as authorized users. These are people whose finances were not analyzed by the issuer when determining qualification, and they are not in any way liable for the balance or repayment. The contract is between the account owner and the issuer -- not those the owner invited in as guests. Like the arrangement you'd have when staying with someone while on vacation, you would be free to sleep in the bed and wash up in the bathroom, but the bank wouldn't come after you if the homeowner neglected to pay the mortgage.

That means the answer to the first part of your question is no, you would not be forced to pay a debt on a card that is not contractually yours -- whether he passes on or continues to live.

This is not to say that there aren't other consequences that come with being an authorized user. During the time that you are allowed to spend with the card, all that activity is being listed on your credit report. And I mean all: the owner's, yours and any other users.' That makes hooking up with other people on these financial deals a little risky. If one cardholder charges excessively and the owner can't (or doesn't) pay on time or allows it to hit the limit for too long, everyone linked to the account will suffer a credit score dip.

And that answers the second part of your question. In the event the person who ought to pay the bill dies, causing the account to go delinquent, you and any other cardholder may see negative notations appear on your credit reports. Some issuers do not report negative card activity on authorized user accounts (American Express is one example). However, just so you know, it is illegal to continue to use a deceased cardholder's credit card. The executor who is handling the deceased's estate should report the death to all credit card issuers. The authorized user can also contact the credit card issuer and request removal from the card. If the authorized user is a spouse of the deceased, and that couple lives in Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin (all community property states), then that spouse may be held liable for any balances. Community property laws in those states treat authorized users as joint account holders, and joint account holders are equally responsible for debt owed on a credit card.

Clearly, being an authorized user has its perks as well as drawbacks. If the negative aspects of being such an account guest are too unpleasant, I suggest thanking the owner profusely for his or her hospitality and taking steps to get your own individual credit card.

See related: What happens to credit card debt after death, Using a deceased spouse's plastic is illegal

Erica Sandberg is a nationally renowned personal finance authority. She’s host of several financial web shows, and a frequent guest for media outlets such as Fox, Forbes, Nightly Business Report and NPR. Erica previously was affiliated with Consumer Credit Counseling Service and was KRON-TV’s on-air credit expert. Her book, "Expecting Money: The Essential Financial Plan for New and Growing Families," was published in 2008 by Kaplan Press.

Send your question to Erica.

Published: December 19, 2012


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