How to Avoid a Credit-Card Surprise When a Spouse Dies [View all]

After her husband’s death, an elderly widow received a jarring surprise—the credit card she had been using was shut down. Her husband had been the primary account holder. The distraught widow had cash in a bank account, but without a credit history or income of her own, it would take time for her to build her credit record to the point where she could be approved for her own credit card.

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The problem, Ms. Altfest and others say, is that consumers often don’t understand the differences between having a joint credit-card account—one in which both parties have charging privileges and are equally responsible for the debt—and an account issued to a primary cardholder, who designates additional authorized users. In the latter case, both parties have charging privileges, but the primary cardholder is generally solely liable for the card’s debt.

Joint credit cards are often used by couples to handle household expenses. But when one spouse doesn’t have a strong credit history—for example, because he or she is a stay-at-home parent—the card is typically issued to a primary cardholder who can then name additional authorized users. Having more users can build up whatever rewards points a card might offer.

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It is easy to remove an authorized user from an account with a request either from the primary account holder or from the authorized user. For one of the parties in a joint account to be removed, by contrast, both parties must agree to release that person from liability. The bank will then check the credit of the remaining card user to be sure he or she is worthy of the credit line.

As happened with Ms. Altfest’s client, revelations may be in store when a couple is divorced or when a primary cardholder dies. If a card represents a joint account, the second user can typically go on using the card, but he or she will also be responsible for any debt. If a husband dies owing $50,000 on a joint credit card, his wife on that account is liable for that debt. But authorized users may find their card canceled because of the primary cardholder’s death. They can then apply for their own credit line, but they might find that their credit history isn’t sufficient to win approval.

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https://www.wsj.com/articles/how-to-avoid-a-credit-card-surprise-when-a-spouse-dies-11614952801 (subscription)

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I'd better start checking our credit cards..