Years ago when I was $52,000 in debt, it was commonplace for banks and credit card companies to offer customers the chance to “skip” their December payments due on their loans and credit cards in order to have more cash to make it through the holiday season.
A quick Internet search shows that the “skip a payment” program is still alive and well today with many lending companies. Although it might seem like a good idea to end the year with some extra cash and avoid making some of those December loan and credit card payments, these types of programs cause more heartache than help. Here are three reasons why you should avoid skipping December payments and keep paying your loan and credit card payments as agreed.
You’re paying more in interest
The term “skip a pay” doesn’t truly equate to skipping a payment at all. What the lender does instead is simply add the missed payment on to the back end of your loan or credit card balance. What this means for the borrower is an extended repayment period and more interest to pay.
Avoid this trap by continuing to pay your credit card or loan payment as agreed, save yourself money and pay less interest in the process.
Read more: 3 ways to get a grip on your money in 2016
You’re tempted to spend more
Psychologically for most people, more money in your pocket means more money to spend. In this way, skip-a-payment programs can lull consumers into spending more than they’d normally spend on holiday expenses. With the extra cash you seemingly have in hand from a skip-a-payment program, you might be tempted to spend more on gifts, to go out to eat more or to spend extra money pampering yourself more in order to reduce holiday stress.
From a financial standpoint, it’s never a good idea to waste seemingly “found” money. So choose to keep making your loan and credit card payments as scheduled and commit to sticking with your originally planned holiday budget.
You’ll likely put more stress on yourself
Debt is stressful – there’s no doubt about it. Although skipping a payment may relieve stress in the short-term (provided you don’t blow the payment money on useless stuff), in the long-term the skip-a-payment program will likely increase your stress level as you realize that you’ve now got even more debt due to the additional interest and an even longer time before you get the loan or credit card paid off in full.
Don’t bring more stress on yourself by avoiding your December payments and throwing them onto the back of your loan or credit card balance. The sooner you can get all of your debt paid off, the less stressful life will be.
Although laws have been put in place to help protect consumers from many unethical practices on the part of loan and credit card companies, there are still programs out there that may seem like a good idea at the outset but mean bad news financially for consumers. Don’t allow yourself to be sucked in by clever marketing and vague lending terms. “Skip” the skip-a-payment offers from banks and credit card companies and make a solid plan to become debt free as soon as possible.
For more money-saving advice, see our Money section.