Credit Card Charge Off Explained

By Neil Farman on December 28th, 2006

Some times you loose control in managing and paying off your credit card bills. At times, it becomes a monumental task to keep up with the bills. And in those tough days of financial hic-ups, suddenly, an agent of the creditor tells you that your debt is about to “charge off”. He also goes to extend of threatening you, with the heavy “charge off” and almost convince you that if you do not pay, you will be ruined financially. Now, what does this “charge off” means and what are the facts to be worried about it?

A “Charge- off” is a word that every credit card holder who fails to make the payments within a certain limit, hears from the creditor company. Charge off should not be confused with some kind of a “charge” to you but a term used commonly by banks as explained below. Charge off is also not at all related to cancellation of your credit card account.

So, what exactly charge off means by the bankers and bill collectors? It is a stage, when creditors write off your account balance as “bad debt” in their books of accounts. This word takes place in front of your name in generally after six months of non payment. After this period the creditors don’t consider you as an asset in their books. In any case, you are their debtor (you are in debt) as a result they (your creditors) will surely try their best to get their money back from you. But this is the rule of accounts to show their balance sheets actually getting balanced. So, they will not spare you at all; you will be penalized by putting a disparaging mark on your credit report. Yes charge off is a sign of default and you are called defaulter in their books, but it is not something which is called a financial disaster or a horrible term that the bill collector will try to convince you in.

Credit card companies consider this word “Charge-off” a disaster and make you feel so embarrassed. They have nothing to do with your problems they just want to get back their money. They pressurize you in such a way that you come make false promises to them. Always remember one thing that the bill collectors are very shrewd that they play a game and demand for post dated checks. As a result checks get bounce and this situation will defiantly lead you take a turn for the worse.

My advice, you should stay away from charge off as far as possible to avoid all those extra worries in your life. Even if you are not able to pay the bills, in timely fashion, this is not the end of your financial status. You can still manage out from the situation of charge-off if you play strategically and patiently.

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