Happy Holidays, Skip a Payment!

by Dave Mauder

Note: This article obviously makes more sense if you read it in November or December! :-)

If you currently have any bank installment loans, auto loans, or credit cards, then you've undoubtedly received an offer recently to skip a payment. How nice of the bank to make such a generous offer this holiday season. After all, we all need some extra money to buy a gift for that special someone, don't we?

Let me assure you, the banks are preying on your emotions and your financial vulnerability. There's nothing wrong with what the bank is doing, as long as YOU make the right decision. Their offer is totally optional, and it your choice whether to take them up on it or not.

They will try to sell you on the "skip a payment" scam by telling you it will free up extra income for the holiday or other expenses. Or that you can use the extra funds to pay down other high-rate credit balances. They might even tell you to brighten your holiday season by enjoying a month without that nasty loan payment.

Regardless of what they call it, or how hard they try to convince you it's a good thing, you must understand the truth. If you take them up on their offer, you'll simply be playing right into their hand. You'll be keeping yourself in debt just a little bit longer. As long as you are in debt, they'll be collecting interest!

You see, the truth is, they aren't really giving you anything. In fact, they are just tricking you out of more of your hard earned income. Every one of these "skip a payment" offers I've seen, requires a $30-$40 processing fee. Usually, they call it something like a payment-extension fee, and it will NOT be applied to the principal or interest of your loan. It's just money you pay the bank for the privilege of skipping your regular monthly payment.

On top of that, skipping a payment only adds an extra month to the end of your loan. With that extra monthly payment also comes an extra month of interest. Don't forget, interest will continue to accrue on the unpaid balance of your loan during the month you choose to defer payment.

You might think this is the worst of it, but the banks have managed to sneak another gotcha in on this deal. If you purchased credit life or credit disability insurance on your loan (which I certainly hope you didn't), the insurance still ends on the original maturity date of your loan. So, in the unlikely event that you become disabled or die a month before your loan is paid off, the bank won't even bother to make that one final payment for you!

All this adds up to more money in the banks coffers, and less money in your pocket. So bottom line, don't fall for offers like this. If it seems too good to be true, it probably is. Always read the fine print and try to look at the offer from their standpoint. Ask yourself, "What's in it for them? Why are they making this offer?" You'll usually find it's not in your best interest to take them up on it.

So what do you do? Nothing! Toss their offer in the trash (or use it as wrapping paper) and make your regular monthly payment as you always have.

Happy Holidays!