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What Does Credit Card Charge-off Means For Credit Cardholder?


Technically speaking, a credit card charge off means that the credit provider or credit card company no longer considers debt of an individual, even if it is currently owed to the company as an asset. The two terms 'charge off' and 'write off' are often confused and individuals tend to assume that they do not owe any payment to the credit card company.

What Does Credit Card Charge-off Means For Credit Cardholder?

When a charge-off is issued for your credit card account?

At the end of every month, credit card company specifies the minimum payment amount which is to be paid-off by the due date. But on account of a number of unforeseen reasons, a cardholder may sometimes not be able to service the dues by the due date. This is the reason why credit providers allow an extension in timeline to clear off the dues i.e. payment due to the company can be cleared at any time between the specified date and 29 days thereafter.

However, if a credit card member still continues to miss on due dates and defaults on payment stream, a notice is placed on their credit report if they fail to clear off their dues for 30 consecutive days. And after an individual's dues owed to the company are left unsettled for 6 straight months, the credit card account is charged off. The situation may also arise in a case when the amount meted by the credit card holder falls below the minimum amount due to the credit provider as specified in the credit card statement. Thus, card holders will be better off by clearing the entire dues within the specified timeline.

Charge-off on credit statements affects Credit Report negatively

Credit report is a summary of an individual's debt repayment schedule and will highlight all the facets including minimum payment dues, late payment and the charge-off situation. Charge-off on an account comes to have in place due to delay or non-payment of dues. And with such negative information, credit score of an individual goes down and this comes as a big hindrance if one wishes to apply for fresh credit. In still other cases, one may be denied credit outrightly. Also, in other instances, one may be charged a higher premium on insurance plans.

Story first published: Thursday, October 11, 2018, 11:08 [IST]
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