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Payment holiday for debt repayments

Credit card payment holidays

Taking a credit card payment freeze can be very useful if you're struggling with your short-term financial situation. However, there are good reasons why you should avoid doing so unless it's absolutely necessary.

What is a credit card payment holiday?

A credit card payment holiday is when your credit card provider allows you to freeze payments on your credit card, for a set period of time, either in full or partially.

It’s very important to remember that a payment holiday on your credit card is only temporary. You’ll still have to pay the full amount back later. You'll also have to pay back any further interest that's added during the break in payments.

This will mean it'll take longer to pay off your credit card. For this reason, if you can afford to keep paying back your credit card, you should do so. That way, you’ll save money by avoiding interest building up.

Can I take another credit card payment holiday if I've already taken one?

If you’ve already taken a payment holiday on your credit card, and you’re still facing financial difficulties due to coronavirus, you can now take a further three months’ holiday.

Credit card payment holidays can be a good way to ease your financial situation. But if you're worried about your finances, and think you may need more support, you should seek free and impartial debt advice.

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How have credit card holidays changed due to Covid-19?

In April 2020, during the coronavirus lockdown, it was agreed with the government that all credit card providers should offer their existing customers the option of a three-month payment holiday.

This has now been extended to six months. If your finances have been affected by coronavirus and you want to request a credit card payment freeze from your lender, you have until 31 October 2020 to apply. If you’ve already had a three-month payment holiday, you can now request it to be extended for another three months.

These new rules are a direct response to the financial difficulties caused by coronavirus. You don’t need to have had coronavirus yourself to qualify for a payment holiday.

Can I apply if I haven't been affected by coronavirus?

Yes, you can still apply for a payment holiday if your situation has not been negatively affected by coronavirus. However, if this is the case, speak to your credit card provider to see what they can do to help.

How do I apply for a credit card payment holiday?

There are three important steps in applying:

  1. Speak to your lender. A payment holiday is not automatic, which means that you should not stop making minimum payments towards your credit card without first speaking to your provider. If you do this, it will be counted as a missed payment by both your provider and credit reference agencies. Missed payments are recorded on your credit file, and if your miss too many, you may be at risk of your account defaulting.
  2. Request a credit card payment holiday. If you're experiencing financial difficulties as a result of coronavirus and have spoken to your provider, you may be able to request a payment holiday
  3. Your provider makes a decision based on your situation. Most card providers will have a fast-track approval process in place at the current time, and you should have a decision quickly. If your financial situation has been affected by coronavirus, you won’t need to provide evidence or have an affordability test. You’ll simply be expected to self-certify that you have less income available to pay your credit card.

What will happen at the end of my credit card payment holiday?

At the end of a payment holiday, card providers should find out if customers can resume payments, or part payments. Your provider should contact you to agree a plan for how you will repay the missed payments.

If you take a payment holiday on your credit card account, your minimum payment will rise, because of the additional interest that has been added on during the holiday.

If you can’t afford to start making repayments, it’s very important to let your card provider know. They'll suggest options based on what will work for you.

Can my card provider still cancel my credit card if I take a payment holiday?

Your provider can still cancel your credit card at any time if they decide to do so. However, if you depend on your card to make essential bill payments or purchases, you should let them know.

I’m behind on my credit card payments. Can I apply for a payment holiday?

A credit card payment holiday may still be an option if you’re behind on your payments. Once you contact your provider, they’ll discuss possible options available to you.

Does a credit card payment break affect my credit rating?

A payment holiday (whether it’s for all or part of your credit card repayments) will not be marked as a missed payment on your credit file. However, it’s worth being aware that credit files are not the only way that lenders assess your creditworthiness.

If you’re worried about any impact to your credit score, you should speak to your provider.

What other options do I have apart from a credit card payment freeze?

If you’re struggling to make your credit card payments, you should consider the following options:

  • debt consolidation loan – this may be a cheaper alternative to relying on your credit card
  • Find a credit card with a better deal – depending on your credit rating, you may be able to find a credit card that offers you a lower interest rate than your current one. You can then switch your balance to this cheaper card.

What if I can't pay my credit card this month?

If you can't pay your credit card this month, the first thing you should do is speak to your card provider to find out if they can help you. 

Credit card payment holidays can help if you're dealing with short-term financial difficulties.

However, they will allow interest to build up while the holiday's in place, and for this reason you shouldn't take one unless you feel it's absolutely necessary.

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