Once youve been paying off a credit card for a while you might be offered a payment holiday.’ Youll get a letter stating that since the company knows its difficult for some families around Christmas theyre 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 its great that they can take a month off from the stress of paying back debt. What they dont usually realize is that these holidays arent a present at all. Theyre a great money-spinner for the credit card company. For the company its 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 youll find that the payment holiday isnt interest free! Youre still being charged interest. And, since youre 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 heres an example. Lets...
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