What Is A Credit Card Charge Off?

A credit card charge off is the point at which a creditor decides to write off your credit card balance as a bad debt

. This usually occurs after a sustained period of missed payments and late payments, and is of often after around six months of such behavior.

For the credit card provider this is also the point at which they stop counting your debt on their books as an asset. Recent reports have shown that the national annual credit card charge off rate has surpassed 10%, as many people struggle in the current economic climate.

It is a good idea to know how the credit card payment system operates. A payment made between one and 30 days after the due date is known as a late payment. Any payment more than 30 days late is known as a delinquent payment or a missed payment. All of these can lead to a charge off.

Once a credit card charge off has occurred the debt does not disappear, and you will still owe the outstanding balance. Your card will also be barred from making further purchases, though the likelihood is that this step would have been taken several weeks before.

As you might expect, all of this is bad news for your credit report. The charge off is reported to the major credit bureaus, and will remain on your credit report for up to seven years. This means that future creditors will be able to see it, and likely refuse your requests for their credit products as and when you make an application in the future.

Payment history is also a vital element in calculating a person's credit score, and will also suffer. It is however possible to start repairing your credit score, provided that no more negative entries occur on your credit report in the future.

Before a charge-off occurs you will have likely received a series of letters and phone calls from the credit provider threatening to take this action. Rather than buckle in and make payment commitments that you cannot keep, it is important to take stock of the situation and not be intimidated into doing this, as it could lead you into further financial trouble.

Instead, offer a minimum payment and ask be setup with a monthly payment plan, or if possible suggest paying a lump sum to avoid them activating a charge off. It is unlikely that the creditor wants to take this step any more than you do, as it is both time consuming and costly for them.

Rather than have to go through the process of trying to repair your credit report once the damage has been done, the obvious solution is to avoid being landed in this predicament in the first place. The key to doing this is making at least the minimum payment on your credit cards each month, and making this payment on time.

A charge off is not the end of the world, but remember that every time you make a late payment you are taking yourself once step closer to receiving a credit card charge off. Do not let it get to this stage, and make meeting your monthly credit card payments a priority.

by: William Trustey

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