By Daisy Maxey 

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.

"I know so many women who have a card that has their name on it, but it isn't really their card," says Karen Altfest, executive vice president at Altfest Personal Wealth Management in New York, who is now working with the widow.

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.

Agreement nuances

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.

And some credit cards permit a primary cardholder to set spending limits on authorized users. Parents often name college-age children as authorized users to help them build or rehabilitate their credit records. Most of the biggest credit-card issuers do report to the credit bureaus on authorized users, but in some cases, the impact of the card's activity on the authorized user's credit record isn't as significant as it would be for a primary cardholder.

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 they are 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.

Authorized users -- whether a spouse or not -- are generally not liable for debt left on a credit card when the primary cardholder dies. The debt is generally assumed by the decedent's estate. The law in some states, however, does hold a spouse who is an authorized user responsible.

When both spouses qualify, there can be advantages to holding a joint credit-card account, says Kristin Carlton, a San Antonio-based senior wealth adviser with Exencial Wealth Advisers, a registered investment adviser. One of her clients lost hundreds of thousands of airline miles on a credit card when her husband, the card's primary account holder, died, she says.

Banks' interests

Still, while all of the financial institutions named in this article allow primary consumer cardholders to add authorized users, many have moved away from offering joint accounts, because designating one party legally responsible for the debt makes the process easier for the card companies if they have to take legal action to collect.

"To have two payers, it just muddies the waters," says Ms. Altfest.

Financial institutions that still offer joint credit-card accounts include Bank of America Corp., PNC Bank and U.S. Bancorp. Bank of America offers joint cards only on a very limited basis.

Wells Fargo & Co. hasn't offered new joint general-purpose credit-card accounts since 2017. Other institutions that don't offer joint consumer credit-card accounts include Capital One Financial Corp., Citigroup, Discover Financial Services and JPMorgan Chase & Co.

A family member should notify credit-card companies, credit bureaus and the estate's executor when a family member dies, and close out a credit-card account when its primary cardholder dies, says Duncan Rolph, managing partner at Miracle Mile Advisors, an investment advisory firm in Los Angeles. That helps to eliminate any recurring charges that may be going onto the card, he says. There is also a potentially high risk of identity fraud when a primary cardholder dies, Mr. Rolph says.

Ms. Maxey is a writer in Union City, N.J. She can be reached at reports@wsj.com.

 

(END) Dow Jones Newswires

March 05, 2021 09:14 ET (14:14 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.