charge-off
CHAHRJ-awf
/ˈtʃɑːrdʒ ˌɔːf/
The declaration by a creditor that a delinquent debt is unlikely to be collected and is written off as a loss.
A charge-off is an accounting action for the bank's tax purposes; it does not forgive the debt, and the consumer is still legally obligated to pay.
The story behind the word. A modern financial compound. 'Charge' comes from Latin 'carricare' (to load a wagon), which evolved into charging an account (loading it with debt). 'Off' signifies removing that load from the active balance sheet.
Word relationships
- write-off: Write-off is a general accounting term for any asset that has lost value, while charge-off specifically refers to uncollectible consumer debt.
- recovery: Recovery is the collection of debt that was previously written off or expected to be lost.
Commonly confused with
- forgiveness: Debt forgiveness means you no longer owe the money, whereas a charge-off means the bank has written it off their books but you still legally owe it.
Word family
- charge off (verb): To write off a debt as a loss.
Collocations
- declare a charge-off
- charge-off status
- settle a charge-off
Example sentences
- "After six months of non-payment, the bank declared his credit card debt a charge-off." Credit counseling session
Memory hook
The bank 'charges' the debt 'off' their active books because they don't expect to get it back. Charging the debt off the bank's active books.
When not to use
Do not use to describe a simple refund or a waived fee; it is a severe negative credit event representing uncollectible debt.
Fun facts
- A charge-off remains on your credit report for seven years from the date of the first missed payment, severely damaging your credit score.
Related words
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