Charge-Off Rate
Charge-off rate measures the percentage of MCA portfolio principal removed from active receivables and recognized as loss — the primary credit performance metric in MCA portfolio reporting.
Why This Matters
Charge-off rate calculation: charged-off principal / average portfolio balance, annualized or by vintage. MCA charge-off triggers vary by funder: typical thresholds are 90-120 days delinquent, merchant bankruptcy, or formal default declaration. Industry charge-off rates range 8-20% annualized depending on credit tier (prime vs subprime), industry mix, and economic conditions. Charge-off rate is leading indicator of portfolio yield compression and capital provider concern.
Frequently Asked Questions
Frequently Asked Questions
What charge-off rates are normal in MCA?
Prime MCA portfolios: 5-10% annualized. Standard portfolios: 10-15%. Subprime: 15-25%+. Significantly higher rates trigger capital provider scrutiny.
When does an MCA get charged off?
Typical triggers: 90-120 days past due, merchant bankruptcy filing, formal default acceleration, or judgment that's uncollectable. Funder accounting policies vary — some charge off earlier for conservative reporting.