Should I Take Advantage of A Credit Card Payment Holiday?

Simply put, a payment holiday lets you skip a payment. It is usually offered by your credit card company in December and is a marketing gimic to gain loyalty and income for the financial institution.  One way to be notified is via your credit card statement. It will show zero in the minimum payment box for that month with a statement that the minimum due is zero for the month.  With the payment holiday, interest will still accrue on the unpaid balance. Not paying the minimum balance can extend the time it takes to pay off the balance. The credit card company doesn’t lose anything. They want you to think that they are giving you a gift and helping you with your holiday purchases. Payment holidays are usually only offered to those with good credit or those that are the least risk.

If your carry a balance on your account each month and decide to take the payment holiday, you should not charge more on your card.  This negates anything you gained.  If you can at least pay the minimum balance that is a better alternative and can save you money.

If you are in a situation that you would be unable to make the payment that month because of unexpected expenses, then skipping the payment is better than paying a late fee and having your interest rate increase on your credit card.

Some credit unions offer payment holidays to their members on most loans, including mortgage loans and vehicle loans.  The fee averages between $25 and $35. By taking advantage of the holiday, you will be delaying paying off your loan for a least a month and will still be paying interest on the loan plus the fee to defer your payment. In almost all situations, the interest rate your pay on your car loan or mortgage is lower than your pay for a credit card and this could be an alternative.

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The best situation is to pay your credit card bills in full so that you don’t need to have a payment holiday.

JRU on 60 Mins SetCredit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.