Charge Offs on the Rise

If you have been trying to understand the credit card world a little more clearly recently, you may have noticed an increase in the use of the term “chargeoff” or “charge off“. This term can seem a bit confusing to someone that is new to the world of finance, but it is essentially a “write off” on the part of the credit card issuer. In other words, if you owe money to your credit card issuer for a long period of time, the company may finally decide to charge off your account.

When the company decides to charge off, it signifies that the company doesn’t believe it will be able to collect on the debt that is owed. Therefore, it no longer wishes to claim that debt as an asset to the company.

Don’t think this leaves you free and clear from repaying the debt, though. You still owe the money, but the company simply doesn’t think it will be able to get the cash from you. In fact, it can become even more difficult to avoid making the payment after the debt has been charged off. This is because the lender usually sells the debt to a third party, usually a collection agency, which will pursue you endlessly in order to collect the debt owed.

It is up to the lender to decide when and if they are going to chargeoff the debt. In half of the cases, the lender doesn’t perform a charge off until the borrower actually files for bankruptcy. If the company does decide to perform a charge off, however, it will reflect very poorly on your credit rating.

According to Fitch’s Retail Credit Card Performance Index, the charge offs for retail credit cards in the United States are expected to rise. Fitch expects this trend to continue throughout the year of 2007 as the domino effect of the changes to bankruptcy laws affect the number of chargeoffs performed. If you are someone that is delinquent in credit card payments, avoid being another one of the numbers used in Fitch’s statistics and start creating a plan to get out – and stay out – of debt.

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This entry was posted on Monday, February 5th, 2007 at 6:57 pm and is filed under Credit Card News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.