Cashing In Q&A columns

Cards have no built-in policies that pay off after death


You can buy add-on insurance to pay the debt after you die, but it’s usually not worth the price

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Question for the expert

Dear Credit Wise,
Does my credit card have a built-in policy to pay off the card when I pass away?  — Larry


Answer for the expertDear Larry,
It could, but only if you purchased credit protection, either when you opened the card or signed up for it at a later time. Based on the fact that you are asking the question, I would say that you probably did not sign up for it because you usually pay for this protection on a monthly basis. You would have noticed the charge on your credit card bill, even though it may only be a relatively small charge. Review your last few monthly statements and see if you have any charges for credit protection. If you are unsure about anything, call your credit card company and ask to speak to a representative who can walk you through your charges.

The appeal of this type of protection is peace of mind if you are concerned about leaving a large credit card bill behind for your loved ones to take care of. This is particularly true if you live in a community property state and you are married.  Even though your credit card may be in your name only, if you are married and live in a community property state, your debts belong to your spouse just like your assets. Your spouse would be responsible for paying off your credit card if you pass away and leave behind a balance. If your card has a credit life insurance policy attached to it, the balance should be covered and paid in full.

However, credit protection is fairly pricey for what you actually receive and much depends on the policy itself. Many of these policies have various options. One is the life insurance policy that will pay off your balance in the event of your death.  Other options include disability and unemployment insurance. Both of these options will only cover your minimum payments for a certain period in the event of a disability that prevents you from working or unemployment. These options are often bundled into one policy. While the life insurance option is easy enough to prove with a death certificate, it is often harder to receive disability or unemployment benefits in a timely manner. In addition, the paperwork involved in those types of claims can be quite daunting.

You are actually much better off skipping the credit protection and targeting the money you would have spent on those premiums toward your emergency savings account. Credit card add-on programs have a record of being aggressively and deceptively marketed, so much so that federal banking regulators have ordered $2.5 billion in refunds in the past three years.

The very best thing you can do is to retire your credit card debt as soon as you possibly can. Once you have achieved that, use your credit cards responsibly, only charging what you can afford to pay in full each month. If you must revolve a charge, try to pay it off in 90 days or less. If you can do that, you will not have to worry yourself or your loved ones about debts left behind.

Be wise with your credit!

See related: What happens to credit card debt after death, Notify card issuer immediately if accountholder dies, After one spouse dies, card debt likely affect the other


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