What Is a Charge-Off on a Credit Card? (2026 Guide)

Why credit cards charge off at 180 days

The 180-day timeline is not a random choice. Federal banking regulators (the Federal Reserve, OCC, FDIC, and NCUA acting together as the Federal Financial Institutions Examination Council) issued the Uniform Retail Credit Classification and Account Management Policy in 2000 and revised it in 2024. The policy requires that open-end consumer credit (credit cards, lines of credit) be classified as a loss and charged off “no later than the end of the month in which they become 180 days past due.”

The rule exists to prevent banks from carrying uncollectible assets on their balance sheets at face value, which would overstate capital. The FDIC’s Risk Management Manual of Examination Policies walks through how examiners apply the rule. Once the issuer charges off the account, the bank takes the loss against its loan-loss reserve and removes the balance from active assets.

Closed-end consumer loans (auto, student) follow a different schedule, typically 120 days. Mortgage loans use 90 days for past-due reporting but follow foreclosure-related timelines for full charge-off.

What changes at charge-off and what does NOT change

Three things change:

1. Credit reporting. The account status changes from “Late 180 days” to “Charged off as bad debt.” This is the most damaging single status code on a consumer credit report. FICO scores often drop 60 to 130 points at charge-off, on top of the damage already done by 180 days of late payments.
2. Servicing transfer. Many issuers transfer charged-off accounts to an internal special collections team within 7 to 30 days, then to a third-party collection agency at 60 to 180 days post-charge-off, then to a debt buyer at 12 to 36 months post-charge-off. Each transfer changes who contacts you.
3. Account access. The card is closed. The cardholder cannot make new purchases or balance transfers on the account.

Three things do NOT change:

1. Legal liability. You still owe the balance. The debt is legally enforceable until extinguished by payment, settlement, discharge in bankruptcy, or expiration of the right to sue under the statute of limitations.
2. Interest accrual (most issuers). Most cardholder agreements allow continued interest accrual at the contract rate, often the post-charge-off “default rate” of 29.99 percent, until the balance is paid or the account is closed.
3. Reporting period. The 7-year period under FCRA section 605(a)(4) runs from the original delinquency date (the first missed payment that led to the eventual charge-off), not from the charge-off date itself. This is called the “Date of First Delinquency” or DOFD and is the most important date on the account.

Comparison table: status progression of a missed credit card payment

The CFPB consumer guide on what happens when you stop paying a credit card walks through the same progression.

What charge-off costs in real dollars

The pillar payoff calculator models the cost of letting an account drift to charge-off versus settling earlier or staying current. Sample math on a $7,800 balance at 24.99 percent APR:

Scenario A, stay current. Pay $260 per month (the standard 2 percent minimum plus interest plus a $10 cushion). Balance is paid in 47 months. Total interest paid is roughly $3,930. No credit damage.

Scenario B, default at 90 days, settle at day 200 for 50 percent. Total cash paid is $3,900 plus a Form 1099-C reporting $3,900 of cancelled debt as ordinary income, plus the credit-score damage of a “settled for less than balance” notation for 7 years. The forgiven $3,900 at a 22 percent marginal tax rate adds $858 in federal income tax unless the IRS insolvency exclusion under Publication 4681 applies.

Scenario C, default to charge-off, do nothing. The account is charged off at day 180. The debt buyer purchases it for roughly 8 cents on the dollar ($624) and may sue if the state’s statute of limitations has not expired. The judgment carries the original balance plus 6 months of penalty-rate interest, plus court costs and attorney fees, often totaling $9,000 to $11,000. Wage garnishment or bank levy follows in 46 states.

In dollar terms, settling before charge-off when the cardholder can fund the lump sum is typically cheaper than letting the account charge off and waiting for the lawsuit, but the credit-report damage is similar in both cases.

What “Date of First Delinquency” means for your timeline

DOFD is the most important number on a charged-off credit card account. Every downstream consequence is anchored to it:

• The 7-year credit report period under 15 U.S.C. § 1681c(a)(4) starts on DOFD, not on the charge-off date.
• The statute of limitations for lawsuit (typically 3 to 6 years for credit card debt, varies by state) starts on DOFD or the date of last payment, whichever is later under most state rules.
• Many states’ renewal of statute-of-limitations rules require any acknowledgment or partial payment to be on the same underlying account that began with the DOFD.

If you cannot find the original DOFD on your credit report, request it in writing from the original creditor and the debt collector under FDCPA debt validation rights (15 U.S.C. § 1692g). The collector is required to provide it.

Five strategies for handling a charged-off credit card

1. Pay in full to the original creditor. Best for credit report status. The account is updated to “Paid charge-off” which still hurts but is the cleanest possible resolution. Some issuers will agree in writing to update the status to “Paid in full” rather than “Paid charge-off” as part of a negotiated payment, but this is rare and never guaranteed. Federal law does not require it.

2. Settle for less than balance. Standard settlement after charge-off lands at 20 to 50 percent of the balance. Get the settlement in writing before sending any money. The agreement should specify (a) the settlement amount, (b) the payment date, (c) that the account will be reported as “settled in full” or “paid for less than balance,” (d) that no further collection will occur, (e) waiver of any deficiency. The FTC consumer guide on debt settlement cautions against verbal settlements.

3. Validate the debt and dispute if it lacks documentation. Many charged-off accounts are sold to debt buyers without complete documentation. Send a debt validation letter within 30 days of the first written collection notice under 15 U.S.C. § 1692g(b). If the collector cannot produce the cardholder agreement, the chain of assignment from issuer through any intermediate buyers, and a complete statement history, you can challenge the debt in court and many cases are dismissed.

4. Wait out the statute of limitations. Time-barred debt cannot be the basis for a lawsuit. The SOL ranges from 3 years (Mississippi, Louisiana, South Carolina) to 10 years (Rhode Island, West Virginia) for credit card debt. Once expired, suing on the debt is itself an FDCPA violation. Be careful: any acknowledgment or partial payment can restart the SOL clock in some states. Consult an attorney before making any payment on time-barred debt.

5. File bankruptcy. Chapter 7 discharges most unsecured charged-off debt entirely under 11 U.S.C. § 727, subject to the means test. The discharge clears the legal liability even though the charge-off entry remains on the credit report for 7 years from DOFD.

What collectors are allowed to do, and what they are not

After charge-off, the FDCPA controls third-party collectors. The collector must:

• Identify themselves as a debt collector in every communication (“Mini-Miranda warning” under 15 U.S.C. § 1692e(11))
• Send a written validation notice within 5 days of first contact
• Cease contact upon written request under 15 U.S.C. § 1692c(c)
• Not contact at unusual times (before 8 a.m. or after 9 p.m. local time)
• Not contact the consumer’s employer for purposes other than verifying employment
• Not use false, deceptive, or misleading representations

Violations are actionable for up to $1,000 in statutory damages plus actual damages and attorney fees under 15 U.S.C. § 1692k. The CFPB and FTC both accept complaints; many state attorneys general also enforce the FDCPA through state consumer protection laws.

Authoritative sources

• CFPB, What happens if I default on my credit card?
• FDIC, Risk Management Manual of Examination Policies
• Cornell Law, 15 U.S.C. § 1681c Fair Credit Reporting Act
• Cornell Law, 15 U.S.C. § 1692g Validation of debts
• Cornell Law, 11 U.S.C. § 727 Bankruptcy discharge
• IRS Publication 4681, Canceled debts

Sibling questions

• What happens after a credit card charge-off?
• Can I still use my credit card after charge-off?
• What is a debt validation letter?
• Can paid credit card debt be removed from credit report?

Related tools

• Credit card payoff calculator, model settle vs payoff math
• Debt management plan calculator

Frequently asked questions

Does a charge-off mean I no longer owe the debt?

No. A charge-off is an internal accounting entry by the issuer that records the balance as a loss for tax and regulatory reporting under FDIC guidelines. The debt remains legally owed. The issuer can still attempt collection internally, sell the account to a debt buyer (Midland Credit Management, Portfolio Recovery, LVNV Funding), or sue you in court for the balance plus accrued interest.

When does a credit card charge off?

Federal banking regulators (FFIEC Uniform Retail Credit Classification policy) generally require credit card issuers to charge off accounts that are 180 days past due. Some issuers charge off earlier when the account holder dies, files bankruptcy, or has other indicia of uncollectibility. The 180-day rule is the upper limit, not a guaranteed timeline.

How does a charge-off affect my credit score?

A charge-off is one of the most damaging entries on a credit report. FICO scores typically drop 50 to 150 points depending on starting score. The charge-off remains on the credit report for 7 years from the original delinquency date under FCRA section 605(a)(4), not from the charge-off date. Paying the charge-off does not remove it; the status changes to “paid charge-off” but the negative entry remains for the full 7 years.

Can a charged-off credit card still accrue interest?

Yes, depending on the cardholder agreement and state law. Most issuers continue to accrue interest on charged-off balances until the account is closed or sold. Some issuers stop interest at charge-off. Debt buyers that purchase charged-off accounts can typically only charge interest at the contract rate or the state statutory rate, whichever is lower under the Fair Debt Collection Practices Act.

Should I pay a charged-off credit card?

It depends on the balance, the statute of limitations status, and your overall financial plan. Paying the original creditor in full keeps the credit-report status as “paid charge-off” for 7 years from delinquency. Settling for less reports as “settled for less than full balance.” Paying within the statute-of-limitations period without confirming the SOL status can sometimes restart the SOL clock in some states. Consult a non-profit credit counselor before paying.