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What Is a Credit Card Charge-Off?

3 min read

Last Updated: June 13, 2024

Table of contents

Key Takeaways

A credit card charge-off is when a creditor has written a debt off as a loss.
A charge-off doesn’t mean the lender won’t stop trying to collect the credit card debt.
If creditors can’t successfully collect the debt themselves, they may hire a debt collection agency or lawyer to try and collect it.

A credit card charge-off happens when a credit card company no longer considers the debt to be an asset and they write it off as a loss. Because you still owe the debt, it could go to a collection agency or a debt buyer might take over the asset.

The charge-off means no additional charges apply to the account. In some cases, they won’t add additional interest. However, the charge-off status will be reported to credit reporting agencies and could negatively impact your credit score.

Still, there are ways to improve your credit after a charge-off.

What is a charge-off?

A charge-off is a mark on your credit report showing potential lenders that you haven’t repaid your credit card debt for many months. When a credit card issuer has determined that you’re unlikely to repay your debt, they report a charge-off to at least one credit bureau. It’s important to note that this doesn’t mean they’re writing off your debt. On the contrary, failure to repay charged off debt could seriously hurt your credit.

When do credit card charge-offs occur?

Charge-offs occur after you’ve stopped making at least the minimum required credit card payment for many months.

Usually a charge-off happens between 120-180 days after you first miss your due date. It depends on the contract terms and type of credit card account. After the charge-off, the credit card company no longer considers the debt an asset, but your lender won’t stop trying to collect.

That last point is important: a charge-off doesn't mean the delinquent cardmember doesn’t have to pay their debt.

After a charge-off, the entity trying to collect payment can change. A credit card issuer may first attempt to collect the debt itself, but after a period of unsuccessful attempts, may hire a debt collection agency or attorney to collect on its behalf. In some cases, card issuers may sell the debt. When debt is sold, its new owner may appear on your credit report along with the original creditor.

How does a credit card charge-off affect your credit?

A charge-off will appear on your credit report for up to seven years after your first missed payment. Because payment history is such an important factor of your credit score, even one missed payment or late payment can negatively affect your score. After a charge-off, you’re likely to see a significant impact on your score.

How to rebuild your credit after a charge-off

Don’t feel overwhelmed because a charge-off might remain on your credit report for seven years. There are still ways you can rebuild your credit history during that time.

Did you know

If you’re looking to get your credit back on track, the Discover it^® Secured Credit Card helps you rebuild your credit with responsible use.¹

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Make all payments on time. Don’t put yourself back in a situation where a charge-off might occur. Making at least the minimum payment on your credit card bill on time every month can slowly help build up your credit. If you need financial assistance, you should contact your lenders to discuss options for repayment.

Also, don’t apply for too many new lines of credit. Applying for many lines of credit results in hard credit inquiries, which may reduce your credit score and set your credit repair process back.

The bottom line

When you stop paying your credit card bill the lender will write your debt off, but you’re still responsible for the debt. But you can recover your financial reputation. Being responsible with your credit going forward is a great first step. A secured credit card can get you started.

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