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Avoid Payment Holidays When Offered
By Jay Jackson
Once you�ve been paying off a credit card for a while you might be offered a �payment holiday.' You�ll get a letter stating that since the company knows it�s difficult for some families around Christmas they�re offering you a month off from paying as a �special present.'

Why Would They Do That?

Offers of payment holidays typically have a very high acceptance rate. People think it�s great that they can take a month off from the stress of paying back debt. What they don�t usually realize is that these �holidays� aren�t a present at all. They�re a great money-spinner for the credit card company. For the company it�s a win-win situation. They get to make big profits just by making their poorer customers happy.

How Can Letting Me Off Paying Earn Them Money?

That's the trick. If you read the small print you�ll find that the payment holiday isn�t interest free! You�re still being charged interest. And, since you�re not paying anything back that month the interest will be there next month for you to pay interest on - called compound interest.

This is interest paid on interest. That might feel a little hard to grasp, so here�s an example. Let�s say you were paying back $1000 of debt at 1.5% per month, about 19.5% per year. Your minimum payment each month is 2% or 26.82% per year.

If you

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