Definition
A charge-off is an act where a debt account is written off as an uncollectable bad debt.
Analysis
Credit card companies will charge-off credit card accounts once they are 180 days delinquent. At this point, the account is considered in default, and it is charged-off as a bad debt.
The Office of the Comptroller of the Currency regulates charge-off policies. It sets the policies that issuers of open-end revolving credit accounts must follow.
Once an credit card account is charged-off, it may no longer be considered a collectible asset account for the credit card issuer. It is recorded as a bad debt, and the account is typically sold to a third-party collection agency to recover a portion of the loss.
The charge-off date is the date the account is charged-off. It is normally turned over to an outside collector at that time. The account will remain on the credit report for 7 years following the charge-off date. This means the account will actually remain for 7 ½ beyond the date of last activity, which is the date the account first fell delinquent.
