Be it business owners, retailers, or consumers, all types of people are increasingly becoming dependent on credit these days. Put it; credit is the equivalent of borrowing monetary funds. The very foundation of qualifying for receiving credit depends on your credit score. Having a healthy or a weak credit score affects you in various sectors of life. However, if you monitor your credit report, a poor credit score does not necessarily spell the end. This is especially true for high-risk business owners. Several high-risk payment processors with 5 star processing reviews offer credit cards to owners of high-risk merchant accounts. Still worried about maintaining a good credit score? Keep reading to learn about ways of avoiding credit card processing charge-offs.
How do Credit Cards Work?
A credit card is one of the most convenient ways to purchase or pay bills. It is easy to carry, and not only can you save some money by using rewards, but credit cards can also help you build a more positive credit history.
When you open a credit card account, you get a predetermined credit limit from your card company. You can spend this money as long as you stay within the limit and then pay the company back. Once your billing cycle is complete, you will receive a statement of transactions from your credit card company. In this statement, you will also find your old and new balances, the minimum payment you have to make, and your due date.
To avoid any interest charged on you, you can complete payment before the due date. Making your payments on time is crucial for maintaining a good credit score.
What do you Mean by 5-Star Credit Card Processing?
While cardholders are an essential part of credit card processing, they do not need to bother themselves much with it. Credit card processing is a sequence of steps involved in completing the transactions made by a credit card.
Businesses that do not depend on credit cards for payments risk diminished sales and no expansion. 5-star credit card processing is primarily associated with high-risk merchant accounts. These are merchant accounts of business owners who run ventures which fall under the high-risk risk industry. So basically, somewhat unconventional businesses have high charge-backs, run risks of fraud, etc. For such companies, accepting credit cards plays a crucial role in their road to achieving success.
You can take these payments in stores or online. 5-star credit card processing makes it a lot easier to accept debit card and credit card payments. Credit card payment processing consists of steps divided into two main categories: Payment Authorization and Payment Settlement.
Credit Card Charge-Off Explained
Do not mistake a charge-off with a right-off. Credit card charge-off happens when your card company stops considering your debt as an asset. Even if your credit card company has written off your debt as their loss, you still owe them money. After a charge-off, a credit card company still holds the right to pursue the debtor to settle the payments. But how does one come upon a charge-off?
As you know by now, a credit card statement specifies the minimum amount payable by the due date. Nevertheless, if you cannot make that payment for some reason, you still have up to 29 days after the due date. If you are still unable to make the payment for some reason, they will place a notice on your credit report once you cross a 30-day delay. For every 30 day delay from there on, announcements will be placed on your credit report until you cross 6 months. Once you cross that mark, they will charge off your account. To avoid facing a charge-off, you will have to make the entire payment.
To What Extent Can a Charge-Off Harm Your Credit Score
A few missed payments, let alone a charge-off, is enough to hamper your credit report. Your payment history is a crucial determinant of your credit score. Facing a charge-off is an indicator of non-payment of dues on your part. It can cause irreparable damage to your credit report as a dishonoring mark. That will also affect the possibility of you ever applying for new credit.
How to Avoid a Charge-Off?
It is clear that a charge-off is not a good thing, and you should avoid it at all costs. The best way to keep a charge-off at bay is to exercise precaution. It is hard to catch up once you are behind on more than a couple of payments. It is good to inculcate positive financial habits and stay within a strict budget. If possible, you should apply for automatic payments to avoid the chance of missing any dues.
We always advise doing everything in your power to avoid facing a charge-off. When you feel like making a payment will be impossible, contact your card company right away. If you bring your financial issues to their knowledge, some companies might be willing to offer you a plan that lets you make reduced payments every month.
If you do face a charge-off, the best thing to do is to work towards removing it from your credit report. If you show that you are punctual and responsible about your credit payments, the effects of the charge-off will gradually diminish over time. Thanks to the credit reporting law, you can have a charge-off removed after 7 years.
Conclusion
You should pay off your debts to improve your credit score as long as the charge-off amount is legitimate. To get rid of a charge-off, you can negotiate with a creditor or contact a credit-repair company. The best option is always to do your best to avoid getting charged off in the first place.