What Is a Credit Card Charge Off?

A credit card charge off occurs when you fail to make regular payments to your credit card company. The credit card company then writes off the outstanding balance to remove it from its accounting ledger and may sell or transfer the debt to a collection agency.

Charge Offs Happen when You Stop Making Payments

Missing one payment, or even two or three payments, to your credit card company will not result in a charge off. Credit card companies do not typically charge off consumer accounts until the consumer either files for bankruptcy or the company is reasonably certain that the individual will not submit any further payments toward the debt. Most credit card companies charge off delinquent accounts after 180 days.

Charged Off Accounts Hurt Your Credit Score

Once a credit card company charges off your card balance, its entry on your credit report will be updated to reflect the charge off. Charged off accounts are given a rating of “R9,” which denotes a severe delinquency. This damages your credit rating. In addition, credit card companies often sell or transfer charged off credit card balances to debt collectors. Debt collectors can also report the account to the credit bureaus and cause additional damage to your credit rating.