Beware of “no-Pay” Holiday Credit Card Offers
Around this time of year, some credit card companies and banks give customers the option to skip December payments. This sounds like a nice deal, but as you probably guessed, there are quite a few downsides, which is why experts caution against these incentives.
These suggestions were more popular many years ago, but they still exist and are still not a good idea. First, you add interest to the total debt payment (and possibly commission). Credit.com’s Christine DiGangi explains:
In the case of an installment loan – such as car loans – your lender will add the missed payment to the end of the loan. For example, if you plan to pay off your loan in June, the last payment for your car will now be in July. You also get interest on the principal balance at the time of the missed payment, which means that you will end up paying a little more by the time you are done with the loan.
Moreover, they also encourage you to spend too much money. These incentives are offered around this time of year for a specific reason: you probably don’t have enough money to cover all of your holiday spending. They encourage you to forget about debt and financial obligations so that you can increase your expenses.
These incentives can also indirectly damage your credit history . One consumer lending expert explained:
When he worked for a finance company that offered consumers a break during the holidays, Hyde said that insolvency always skyrocketed in January. People will give up the habit of paying. Unlike the month when the lender allows the missed payment, the lenders report to the credit bureaus about all consumers who missed the next monthly payment.
It has every potential for a debt trap : it targets people with financial difficulties, it sells as an incentive, and banks and credit card companies make more money on interest. In short, you probably want to stay away.
If not, you at least want to read the fine print and know what you are getting yourself into. For more details, check out the full history of Credit at the link below.
Wait, do some banks allow you to skip payments on holidays? | Credit.com