May
18
2009
Is Skip-A-Payment Month a Good Bargain?
Author: JoshIf you have a credit card with Chase, then this month you may have received a statement with a minimum payment of $0. You may have been given this option on car payments, credit card balances and even a mortgage around the holidays as special holiday bonus. At first glance this may seem like a good idea, but is it really?
Let me ask you this…why are these companies in business? It is to make money or be nice to everyone in tough economic times or during the holidays? Clearly they are in it to make money and would not do ANYTHING if they were not going to make money with it. They are financial institutions. We are not a charity in receipt of their generosity. We are their business.
In many cases the skip-a-payment feature actually costs you a fee (typical fee is around $20). The reality is they still come out ahead because not only will they get your money eventually, but now they have collected an extra $20, plus they still acrue interest on the balance so they are collecting interest on interest for the duration.
In the long run this actually increases the income for the financial institutions. So it really is not a bargain for us. However, and I truly hesitate to say this because there are so many other options, if you feel like your back is against the wall, and it’s either take advantage of this skip-a-payment offer or skip-a-meal. you are pulling your hair tryign to figure out how to provide for your new baby or be late on another payment and get late charges. Well then maybe, just maybe it might make sense for you. But before you do anything make sure you get ALL the information. Find out what fees are involved, how interest acrues, what impact this has on your finance rate for the credit card balance and future charges. Make sure you know what you are getting into before you even think about skipping this payment.
