The nature of the charge order in the charge frustrated compound LuFe(2)O(4) and its effect on magnetocapacitance were examined on the basis of first-principles electronic structure calculations and Monte Carlo simulations of electrostatic energy. Our work shows that two different types of charge order of almost equal stability (i.e., square root of 3 x square root of 3 and chain types) occur in the Fe(2)O(4) layers of LuFe(2)O(4), and that the ground state of LuFe(2)O(4) has a ferrielectric arrangement of the Fe(2)O(4) layers with square root of 3 x square root of 3 charge order. The giant magnetocapacitance effect of LuFe(2)O(4) at room temperature is accounted for in terms of charge fluctuations arising from the interconversion between the two types of charge order, that becomes hindered by an applied magnetic field.