What is a 'Net Charge Off - NCO'
A net charge off (NCO) is the dollar amount representing the difference between gross charge-offs and any subsequent recoveries of delinquent debt. Net charge offs refer to debt owed to a company that is unlikely to be recovered by that company. This "bad debt" often written off and classified as gross charge-offs. If, at a later date, some money is recovered on the debt, the amount is subtracted from the gross charge-offs to compute the net charge-off value.
BREAKING DOWN 'Net Charge Off - NCO'
Bad debt or poor credit quality loans are regularly charged off as bad debt and purged from the books, often on a monthly or quarterly basis. If, at a later date, the company find out it was wrong and part of the debt is actually repaid, the net charge-off can be calculated by finding the difference the gross charge-offs and the repaid debt. A negative value for net charge-offs indicates that recoveries are greater than charge-offs during a particular accounting period. Companies want this number to be low.