Credit card debt can keep you up at night. It may cause anxiety attacks or insomnia. It can take years to get out of it. But what happens to your credit card if you die? Is it forgiven upon death?
Is Credit Card Debt Forgiven When You Die or Does Your Family Need to Pay for It?
When you die and you have not paid your credit card debt, your assets will be frozen until your will is validated.
Your debts are settled while your beneficiaries are identified.
Because credit card debt is considered unsecured debt, it is not linked to collateral. The state may rule that your remaining assets will be used to pay off your credit card debt.
These assets may include remaining cash or property with cash value. Some assets, including life insurance payouts, might be protected from this process as long as there is a custodian to them.
On the other hand, if you don’t have assets, it does not necessarily mean your loved ones will pay your credit card upon your death. But they may do so if you have a joint account holder on your credit card.
Your spouse may be responsible for paying off the debt. But it only happens in some states. Authorized users are not responsible for your unpaid balances when you die.
However, if you die without paying off your credit card debt, your heirs may not get their share of the inheritance.
For that reason, many financial experts recommend setting up a trust fund. To set it up, make sure to hire an estate lawyer. It also requires planning well in advance.
What to do with Your Credit Card Debt?
If you don’t pay on time, your credit card debt can accrue interest. It is the interest that will really keep you up at night.
Thankfully, there are steps that you can take to ensure that your balance is under control.
The first thing you can do is pull your credit report. In that way, you have a picture of all your debt.
You can get an overview of your credit card and loan balances.
Once you know how much you owe from your credit card company, you can put together a plan to pay it off.
Tips for Paying Off Credit Card Debt
Credit card debt is one of the reasons many people stay up all night. If you are one of them, here are some of the ways you can do to pay it off.
In that way, you can be on your way to a life without debt.
Complete a Balance Transfer
One of the ways to get out of credit card debt is to use a balance transfer credit card. This will help transfer debt from a high-interest credit card to a balance transfer credit card offering no interest for almost two years.
But keep in mind that balance transfer cards have maximum limits on the amount of money owed you can transfer. You should also remember that you cannot transfer credit card debts between cards issued from the same bank.
For that reason, before you even transfer your credit card balance to another credit card company, make sure to read the fine print.
You must also have at least good credit before you are qualified for a balance transfer credit card.
Apply for a Personal Loan for a Large Amount of Debt
Because a credit card balance transfer has a maximum amount you can transfer to another bank, all your credit card debt may not be transferred completely. If that is your case, you can choose to apply for a personal loan.
You can consolidate all your debt into one personal loan. But it depends on your credit score. If you’re a good payor, you may qualify for a loan amount that will cover your entire balance.
The good thing about a personal loan is that you can receive a fixed amount of money and you need to pay it for a fixed time period. The interest rate is also fixed. However, you can’t expect a personal loan to have a 0% interest rate.
Then again, the rate is still lower than when you keep a balance on your current credit card.
Pay Off Debt with High-Interest
If you have credit card debt across various credit cards, it is a good idea to pay off the card that has the highest interest rate first.
This method is known as an avalanche. It minimizes the interest you accumulate. As a result, you get to save money in the long run.
This is ideal if you completed a balance transfer but the entire debt can’t be transferred into one card. You should pay off lingering balances with the high-interest card first. But you also have to pay the minimum on your balance transfer card.
Once you have fully paid the high-interest balance, you can tackle the debt on your balance transfer card more aggressively.
Borrow Money from Family or Friends
If you can’t take advantage of those methods mentioned above, you can always borrow money from your family and friends.
However, many financial advisers don’t recommend this method if you don’t want to ruin your relationship with them.
Yes, your relationship with your family or friends will be crushed if you don’t know how to pay for the money you borrowed from them.
For many, it is better to just borrow money from a bank or a person you don’t have a problem ruining your relationship with.
However, in some cases, this method is your only option. It is especially true if your credit is poor. That is if the score is below 580, you may have difficulty qualifying for a balance transfer credit card or applying for a personal loan.
Then again, borrowing money from a family member or a close friend should only be your last resort.
Credit Card Debt — Avoid It
Credit card debt can keep you up all night. It is especially true if it starts to grow and accrue interest. If you wish to avoid it, you need to be financially educated.