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How To Fight Credit Card Charge Offs

Updated on June 27, 2011

You Can Fight Credit Card Charge Offs

Americans have billions of dollars in credit card debt. it is no secret our country is in a massive recession and that means millions are falling behind in their credit card bills. You can fight credit card charge offs and work directly with your credit card company to manage and pay off your credit card debt.

Use this simple, non-professional information and advice to stay out of third party collection companies and learn to manage your credit card debt.

fight credit card charge offs
fight credit card charge offs

What is a charge off?

A charge off is when a the holder of a debt has exhausted all efforts to collect from the borrower and sends the debt balance to a third party for collection. In most cases, the original account is closed and the borrower has to deal directly with the third party collection agency and no longer has access to the original lender.

Most credit card companies will charge off the remaining balance on a credit card if the borrower has not made payments in six or more months. The charge off date can also be executed if the borrower has not made the equivalent of a payment in six or more months.

For example, let' say the borrower made payments on their credit card in January, February and May. They then did not make another payment until December. The credit card companies will take all those payments and structure them according to the last month owed. So the payments would apply to January, February, March and April. Come December, the credit card company might declare that a payment had not been received in over six months and may charge off the account.

Why are charge offs bad?

Charge offs adversely affect one's credit score. Credit scores determine if one can borrow money for a car, house or new credit of any kind, what amount can be safely lent, and what the interest rate will be on the principal.

Credit card companies and other lenders typically send charge offs to third party collection agencies. These companies will hound borrowers night and day to pay or settle their debt. Further, some credit card companies may send charge offs to an outside litigation company for court action. A lender can sue a borrower for failing to pay their past due balances.

It is wise to avoid charge offs of credit card balances if at all possible.

fight credit card charge offs
fight credit card charge offs

How to fight credit card charge offs

Borrowers must actively manage their credit card debts to avoid charge off of accounts. Here are some steps you can take with credit cards.

1. Pay off balances in full if possible. If not, pay the minimum monthly payment.

2. Pay on time. A percentage of bad credit scores are related to late payments.

3. Pay something every month. Even if you do not have the total payment due, make as much of a payment as possible.

4. Contact the credit card company the instant financial problems begin. Let them know your situation and what your plans are to get back on your feet and to stay current on your obligations. Don't wait. Credit card companies take into account contact FROM the customer.

5. If you cannot pay on the due date, making a payment during the same calendar month counts. While a late payment will result in a finance charge, making a payment in the same month stops charge off actions. For instance, if a credit card is in its sixth month of delinquency, and the payment is due on the 18th, contacting the credit card company and making the payment by the 25th may stop charge off even though the payment is late. The secret is to contact the credit company before they write off the debt and make a payment.

6. Take advantage of credit card company payment plans. If your financial situation is precipitous, take advantage of a payment plan even if it requires you to close the account. Many credit card companies have very generous payment plans with low interest rates to clear past due balances. While a closed account on a credit report is not great, a charge off is far worse to a credit score.

7. Offer to make automatic withdrawals with credit card companies. Often, the credit card company will take a lower payment if the borrower agrees to automatic monthly payments and agrees to a payment plan of at least one year.

The secret to fighting charge offs with credit card companies is to communicate regularly with the company before things get out of hand.

fight credit card charge offs, how to fight credit card charge offs, credit card charge offs
fight credit card charge offs, how to fight credit card charge offs, credit card charge offs

What to do if a credit card account has gone to charge off

If a borrower has kept up with their credit card account, but it has gone to charge off, generally they will be contacted by the third party collection agency first.

When contacted, tell the collection agency that all future correspondence will only be in writing and for the collection agency to send a written statement about the debt by mail.

Next, the borrower should contact the credit card company and begin a dispute process to bring the debt back to the credit card company and away from the collection agency. If the borrower can show that they corresponded regularly with the credit card agency and attempted to make payments over the preceding six months, there is a good chance the account will be brought back in house.

The dispute process may take 30 to 90 days with the credit card company, but generally will only take a few days. If the borrower is turned down for their request, they should request another immediately.

Further, borrowers should insist with their credit card company that they will not make any payments to the third party collection agency, but will only make certified payments to the credit card company. Many credit card companies will consider this and be willing to work with the borrower.

Be warned that during the dispute process, the borrower must correspond in writing with the third party collection agency to keep them from escalating the collection process.

If the credit card company does agree to the dispute and sides with the borrower, the borrower can expect to only have one chance remaining with the lender. It is best to get immediately on a payment plan and stick to it, or find the funds and pay off the debt immediately.

fight credit card charge offs, how to fight credit card charge offs, credit card charge offs
fight credit card charge offs, how to fight credit card charge offs, credit card charge offs

The Good and Bad about debt and charge offs

Credit card debt, no matter how daunting, can be managed and paid off with discipline and work. At the end of the day, all credit card companies simply want their money and would rather have it from the principal borrower than paying a third party agency to collect it. Working directly with the credit card companies and communicating regularly is the key to avoiding charge offs of credit card accounts.

Debt is bad and a borrower cannot run away from their debt. While a bad credit mark may be on your credit report for up to seven years, creditors and collection agencies will often sell old debts and keep them "fresh" on a borrowers credit history. That is why it is crucial to deal with credit card debt now with the original lender before it gets out of hand.

Settling a debt, the process of paying less than one owes to a credit card company, or worse a collection agency, may actually do more harm to a credit score than paying off a debt the old fashioned way: one month at a time. In addition, settling a debt may incur income tax obligations.

The secret is to work directly with credit card companies and keep the debt from going to charge off status.

Fix your credit report!

There are companies which can help get bad items, like charge offs, removed from your credit report. Check out these companies...

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Should I take a debt settlement?

That's a tough decision. First, what is debt settlement? That means negotiating with the credit card companies a lower balance and paying it off immediately. There are pros and cons to debt settlement for credit cards.

Pro

- The credit card account debt is cleared

- Monthly payments stop

- Collection calls and letters stop.

Cons

- The unpaid balance is a taxable event with the IRS. If a credit card balance is $10,000.00 and the holder settles for a one time payment of $6000.00, then the unpaid 4000.00 is considered taxable income.

- The credit card account is listed on the holder's credit report as "settled". Many creditors consider this a black mark and will not lend as the holder has a history of not paying the full amount owed.

- Creditors will generally not accept a settlement unless the holder has failed to make payments for a significant amount of time.

- The creditor may not accept the terms of settlement and if the holder has not been making regular payments, they may find themselves deeper in debt.

Deciding to use debt settlement should be carefully considered. Read more about What is Debt Settlement here.

Other Consumer Finance Lenses

I have several other consumer finance lenses which might be of interest. Please visit each and leave a "like" if you find it useful.

I have been trying to pay off my credit card debts and have had personal experience with fighting charge off of credit card debts before. Share your experiences or simply let me know what you think about this lens here. Thanks for visiting!

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    • profile image

      creditsabre 3 years ago

      Debt consolidation firms are not only risky (as they need you to put all of your payments with them), but it may also harm your credit score too. Credit card debts are charged off usually after 6 months. Settlement accounts take time to build up, generally taking 6 months or more. The credit charge off will last until 7 years time or more (or less) based on the terms.

    • profile image

      Susapence 4 years ago

      Can i get a cerdit card and transfer my wifes debt to mine to get 0% intertest?

      Confused as to whether i can pay directly from new card to pay off another persons card??

      Credit Help Cards

    • flinnie lm profile image

      Gloria Freeman 4 years ago from Alabama USA

      Hi thanks for the info about credit card charge offs.

    • profile image

      anonymous 4 years ago

      @jgary lm: I am talking about the third party buyers that purchase charged off debt at pennies on the dollar that turn around and sue for the original amount on the account plus the little fees and interest they tack on. This is illegal and a violation of the fair debt collection act. Once you file an answer and a counter suit to them they will drop the case because et know what they are doing. They are merely trying to get a default judgement because people get scared and think there is nothing you can do. I am well aware that a first party can sue you for an unpaid bill. However those cases can be easily won as well.

    • jgary lm profile image
      Author

      jgary lm 4 years ago

      Tom, I am not a "shill" for anyone and do not work for any credit card company. To your point, if a court is allowing collection agencies or credit card companies to file suits against debt holders, than it is not illegal. A credit card agency can sue a debt holder for failure to pay. Many do not though because of the cost and time and instead, continue to use collection agencies to collect bad debts.

    • profile image

      anonymous 4 years ago

      This is an article written by a credit card company shill. Once a first party sells the debt it is dead. Third parties have no right to the debt you don't owe them anything. I wish the court system would stop letting these pathetic people use them as a collection agency. If you are ever sued by a third party fight it because it is an illegal lawsuit. Do not let them get a default judgement

    • Ahdilarum profile image

      Ahdilarum 4 years ago

      Card bill has to be settled within the due date, then u can enjoy the credit facility..

    • KeepingItSimple1 profile image

      KeepingItSimple1 5 years ago

      Very good info and well written...

    • KeepingItSimple1 profile image

      KeepingItSimple1 5 years ago

      Brilliantly factual and extremely helpful information. It is funny to note that the security word I have to enter in order to post this comment is 'risktaker'. I guess we were all risk takers when we started spending on our plastic! Thanks for the info!

    • franstan lm profile image

      franstan lm 6 years ago

      Great lens

    • WilliamSimons profile image

      WilliamSimons 6 years ago

      Good tips. Hopefully, the masses will alter their views towards debt, savings, etc.

    • profile image

      anonymous 6 years ago

      Thank you

    • profile image

      anonymous 6 years ago

      thanks

    • profile image

      scoremorecredit 6 years ago

      great lens, giving tips for the people is cool..so many dept companies to day and offering some loans, do you think its safe?

    • profile image

      404notfound 7 years ago

      Neat lens. There are so many debt companies out there it is good to know consumers can do something about it on their own.