Many credit lenders (credit card companies, credit unions, banks and so on) offer “Skip-A-Payment” options for borrowers.  Every lender has its own terms and conditions (how many payments per year you can skip, what type of credit is included or excluded in the program, and the amount of fee charged for the privilege), but you typically can skip one payment per year for $10-$50.  Sounds like a great deal?  Well “Skip-a-Payment” can be good or bad – it depends.

Why They’re Bad

The way these services are sometimes marketed towards the financially foolish is disturbing.  The credit lender may send a happy sounding letter, or post on their website something like:

“Dear valued customer, It’s summertime, and X-Bank wants to say thank-you for your business by offering you a vacation from your bills!  That’s right, you can choose to skip this month’s payment on your current account listed above.   Upon receipt of your extension agreement we will waive your payment for this month and apply a $25 extension fee to next month’s invoice.   There’s no need to send any money at this time.  Just think of what you can do with the extra cash!”

 “Take a vacation from paying your bills” subtly sends the message “get out of your responsibility (because we all hate responsibility) – hey why not take a vacation with the money you save because you deserve it!”

Of course not everyone will use the money for a vacation, but many will believe they are getting a break, when really, they’re going to end up paying more than that $25 extension fee.

Meanwhile the credit lender gets a few quick bucks from the borrower that will NOT be applied to the outstanding balance.  The lender successfully extends the life of the loan by one month (at least) and earns even more interest on the money not paid that month.

Why They’re Not So Bad

Skip a payment services can also be beneficial IF they’re used for a good reason and not as an excuse not to suffer paying a bill:

1. Emergencies
There may be a month where you absolutely just CANNOT make a payment – maybe you’re in between jobs, had to take time off work for health reasons or needed emergency surgery for a loved pet.  These things happen. Skip-a-payment services can help you avoid a delinquent account.

2. Paying Off Higher Interest Debt
It makes sense if you have credit card debt (which is usually much higher interest than other loans) to take the money you would have applied to a mortgage or car loan at 5% - 10% and reduce your 18-29% credit card balance.

So next time you get that tempting offer to skip your credit card or loan payment consider the consequences against the benefits. If you don’t have any higher interest debt to which the “savings” could be applied, don’t be suckered into thinking your credit lender is doing you a favor.  If you are facing rough times, remember that you likely can actually miss a payment to avoid damaging your credit history.

Linda Bustos is an Editor for Creditorweb, where you can learn about credit cards, discuss personal finance in the credit forum, read reviews on credit card offers from multiple lenders and apply online for a credit card.

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