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Thinking about a credit card re-payment holiday?

Date: 08 July 2020

The Coronavirus has changed the way many of us think about our finances, as millions of households tighten their belts when it comes to spending. Banks and finance companies can be congratulated for providing users of credit cards with a re-payment holiday. However, delaying repayments could put people at increased risk of going into ‘problem debt’ and finding themselves in a position where it’s difficult to clear their balance.

Whilst these re-payment holidays have undoubtedly helped many during the pandemic, it’s important to remember that they are only a holiday, and that in most cases they will continue to accrue interest on outstanding balances.

New analysis from Quilter 1, shows that an average household credit card debt of  £2,655 2, with an average interest rate of 18.54% 3, could incur more than £250 of interest over a six month holiday, increasing the outstanding balance to £2,909 or around 10%.

In the immediate term, this will mean people are worse off since they’ll need to pay more to clear their balance when the holiday ends. Although these ‘holidays’ are not supposed to impact credit scores in the way a normal missed payment of a credit card might, over the long-term it’s inevitable that extra credit card debt could affect some people’s eligibility for lending going forward.

That’s because lenders use a wide range of factors to assess whether to extend a mortgage to someone. If you have significant outstanding credit card balances that may count against you.

Borrowers should consider whether they really need to take a credit card re-payment holiday and only use them where necessary, as it could have an impact on their longer-term financial future.


1 Figures calculated by Quilter based on a 180 day repayment holiday, average credit card debt figures from The Money Charity and the Bank of England average credit card interest rate.

The Money Charity, Money Statistic May 2019:

Bank of England average credit card interest rate: