If you haven't made a payment on your credit card in a long time, eventually the credit card company will charge off your account. A charge-off can have significant long-term consequences for your financial health.
What "Charge-Off" Really Means
Some people think that charged-off debts are somehow eliminated and that they don't have to pay them. This is untrue. "Charge-off" is an accounting term that describes a debt that the creditor doesn't think is going to get paid. The creditor can still try to collect the debt, however, or it may decide to sell or assign the debt to a collection agency.
Consequences
Charge-offs on your credit report can hurt your chances of getting credit and can seriously damage your credit score. You may also be liable for paying taxes on any charged-off credit card debt--your credit card company may report the charge-off as a loss, and issue you a 1099-C form, which you then must report to the IRS as taxable income.
Time Frame
Credit card companies generally charge off accounts six months after the account was last current. A charge-off can remain on your credit report for seven years.
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