Skip a Payment

June 2009

Hey John - I love watching you on CNBC. Hey, I got a letter from my credit card company that offers to allow me to skip a payment and my statement shows "no minimum payment due." What do you think about their offer? I can use the break. My regular minimum payment is over 200 dollars.

Karlene

Hello Karlene. Thanks for watching. I read your question and I think you're asking about an offer to skip a payment on your credit card. This is a common offer from credit card issuers that normally comes around the holiday season.

You might be wondering why in the world a credit card company would offer to allow you to skip a payment, especially right now when the credit card default rate is creeping close to 10 percent. I mean, no payment equals no money for them, right?

But there's a catch. What you probably didn't notice was the fine print that says something like this: "Interest will continue to accrue." Interest is the fee you pay for the privilege of not paying off the balance in full each month. If you pay in full, the credit card issuer doesn't make interest, and they love interest.

Their offer to you was designed to entice you to skip your payment so interest would be applied to the full amount for that month. And if your balance is really high and your interest rate is really high too, skipping payments can get very expensive very quickly.

So if you can, pay your bill this month and don't skip the payment. If the $200 per month payment is getting to a point where you can't afford it anymore, seek help from a non-profit credit counselor from www.nfcc.org.

Best,

John

As always, if you have any questions or comments please feel free to drop me a line at AskJohn@credit.com

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