Payment Holiday Definition

Some lenders offer an account feature popularly advertised as a "payment holiday". For example, your credit card company might send you an offer in November stating that you can take a "payment holiday" in December by simply not making the normally-scheduled payment. These offers are only extended to accounts in good standing, and they are of course always tempting around Christmas time when so many expenses are likely piling up.

Consumers should be aware that the "payment holiday" isn’t really a holiday-it’s more like a deferral. The principal still accrues interest and the interest is added to the principal for the next billing cycle. Thus, the money "saved" during the "holiday" must be paid back later, with interest. Also, many credit card companies assess a "payment holiday" fee which is also added to the principal.