What Is a Credit Card Debt Write-Off?

Overdue Debt

A credit card debt write-off can sound as if it is a debt relief for you - that you no longer have to pay your credit card balance. The truth is that a credit card debt write-off can have a negative effect on your finances, your credit, and your overall financial situation.

What Is It?

When a credit card holder stops making their payments, a credit card issuer can write off the debt. In short, a "write-off" is an accounting term that removes the debt from the accounting books of the credit card company. This means that they can report the credit card balance as a loss, so they can decrease their tax liability.

A credit card company typically writes off a debt that they deem uncollectible. Generally, this happens if you haven't made a payment on the card in at least six months according to Nolo.com.


Credit card debt write-off is more of a "behind-the-scenes" occurrence, but this is how it unfolds.

  1. You stop making your payments. The credit card company pursues you to try to get you to make your payments. They typically send you letters, send you emails, and call you.
  2. Once the credit card company makes these attempts, but you still don't make any payments, after six months, they typically deem your debt uncollectible.
  3. They alert their accounting department that your account is a write-off so they can "write it off" as a loss for tax purposes.
  4. The credit card company usually (but doesn't have to) sell the debt to a collection agency for pennies on the dollar.
  5. The collection agency tries to collect on the debt that they now own. The debt collection agency might try to strike a deal with you to pay a lower amount as long as you pay the debt the agreed upon amount in full, which is also known as a debt settlement. The agency can also establish a payment plan so that you can repay the debt and work toward rebuilding your credit.

During the lack of payments, the credit card company reports your delinquent payments to the three major credit bureaus. When they write off the debt and send it to a collection agency, the credit card company also reports these actions.

The charge-off or write-off of credit card debt is specifically listed as a charge-off or write-off rather than a delinquent account, which is extremely detrimental to your credit rating.

The Effects

When a credit card issuers writes off your bad debt, it does not wipe out your responsibility for paying the debt. You still owe the money and are still responsible for repaying the debt. Instead, the issuer sends the debt to a collection agency. The collection agency continues to try to collect the balance you owe on the credit card, including interest and late fees that you have accrued. Additionally, collection accounts show up on your credit report and can reduce your credit score.

How long the write-off remains on your credit can vary from state to state. According to CreditCards.com, most states allow it to remain for three to six years from the date of your first delinquency, according to Bankrate.com. Some states allow it for up to seven years from the date of your first delinquent payment.

Negative Consequences

When you don't pay your credit card debt, the credit card company can write it off. Writing off the debt removes it from their accounting books, but it doesn't remove your responsibility for repaying the debt. Write offs are something you want to avoid, when possible, because it can wreck your credit, making it hard to establish new credit in the future.

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What Is a Credit Card Debt Write-Off?