Avoid Payment Holidays When Offered
Below is a MRR and PLR article in category Finance -> subcategory Credit.
Avoid Payment Holidays: A Costly Mistake
Summary
Credit card companies may occasionally offer you a "payment holiday" as a gesture during times like Christmas, promising a month without making payments. While this might seem like a gift, it can be a costly trap.Why They Offer It
These offers are popular because people enjoy the idea of taking a brief break from debt repayments. However, payment holidays aren't gifts; they're profit-makers for credit card companies. They increase their earnings by enticing customers to accept what seems like a helpful offer.
The Hidden Costs
Here's the catch: the payment holiday still incurs interest. When you skip a payment, the interest compounds, meaning you'll pay interest on top of interest. For example, imagine you owe $1,000 at an interest rate of 1.5% per month (approximately 19.5% annually). Your monthly minimum payment is 2%. Without a holiday, you'd pay $233.51 over the year and owe $941.62. But if you take a holiday and pay over 11 months, you'll pay $217.80 and owe $960.55. Your "break" ends up costing you almost two months' worth of payments!
A Confusing Scheme
The math can be tricky, designed to confuse you and obscure the actual costs. Simply put, the more you owe, the more the holiday costs you. Don't fall for it.
If It Sounds Too Good to Be True
When credit card companies offer you something, it's because they're profiting from it. If the source of their profit isn't clear, be wary and critically evaluate their offer.
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