|
SolveYourProblem.com
Article Series: Debt Relief & Debt Consolidation
I Want To Get
Rid Of My Debt...NOW!
Avoid
Credit Card Payment Holidays
Once you’ve been paying off a credit card
for a while, you might be offered a ‘payment holiday’. You’ll
get a letter, saying that since the company knows it’s difficult
for some families around Christmas (or whatever other excuse
they think up), they’re 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 it’s great that they can take a month off
from the stress of paying back debt. What they don’t usually
realize is that these ‘holidays’ aren’t a present at all –
they’re a great money-spinner for the credit card company.
For the company, it’s 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?
Well, that’s where the trick comes in. If you read the small
print, you’ll find that the payment holiday isn’t interest
free! You’re still being charged interest – and since you’re
not paying anything back that month, the interest will be there
next month for you to pay interest on (compound interest, you
see).
That might feel a little hard to grasp, so here’s an example.
Let’s say you were paying back $1000 of debt at 1.5% per month
(about 19.5% per year). Your minimum payment each month is
2% (26.82% per year).
If you pay the minimum for all 12 months of the year, then
you will pay back $233.51, and owe $941.62 at the end of the
year. Your debt has been reduced by $58.38, and you’ve lost
$175.13 in interest.
With the payment holiday, though, you pay 2% per month for
only 11 months (so you pay 24.3% back on the debt over the
year). That’s $217.80, and you’d owe $960.55 at the end of
the year. Overall, you’ve paid $37.86 for your payment holiday
from a payment of about $20. In other words, your month off
cost you almost two months of payments.
Don’t worry if you don’t understand all the math involved
here – it’s been deliberately designed by mathematicians and
marketers to be as confusing as possible, to stop you working
out what a bad deal you’re getting. After all, if you haven’t
read this, would you really ever turn down a month off paying
your bills? Just remember: don’t fall for a payment holiday.
The more you owe, the more that ‘holiday’ will cost you. Wouldn’t
you rather take your money and go on a real holiday, instead
of spending it all on repaying credit card debt?
If It Sounds Too Good to Be True…
As with all things in life, remember that no-one gives you
something for nothing – least of all credit card companies.
Anytime they offer you anything, realize it’s because
they are going to make a profit on it. If you can’t see where their
profit is coming from, be suspicious – it’s probably all a
big scam that’s going to cost you money, even if you don’t
realize it.
Click here to discover my current SolveYourProblem recommendation and choice pick for the fastest, easiest and best debt relief solution you'll find anywhere. Get it and reward yourself with more cash in your pocket.
# # # # #
by SolveYourProblem.com
: 2006
> Home > Debt
Free Articles: Main Page
|
