What Are Charge-Offs?

By Jeremy Bowman – Updated Feb 22, 2025 at 11:13 AM EST

Key Points

Charge-offs are debts deemed uncollectable by lenders, impacting bank profits and borrower credit scores.
Strategies to manage charge-offs include setting aside provisions for potential losses and adjusting for economic changes.
Borrowers can negotiate with lenders or collection agencies to manage or remove charge-offs from credit reports.

The banking business is a complicated one. Banks have to balance a range of demands from different stakeholders and market forces to generate as much of a profit as they can for shareholders.

Among the key metrics that investors need to watch are charge-offs, which successful banks avoid or minimize. Charge-offs have implications for both lenders and borrowers.

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Bills stamped Past Due and Account Closed. — Image source: Getty Images.

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About the Author

Jeremy Bowman has been a contributing Motley Fool stock market analyst, covering technology, consumer goods, and macroeconomic trends since 2011. Before The Motley Fool, Jeremy was a newspaper reporter, restaurant manager, and English teacher abroad. He holds a bachelor’s degree in English from Colorado College and a master’s degree in business administration from American University. One of his Motley Fool headlines was briefly featured on Late Night with Stephen Colbert.

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