Right about now, a lot of credit union members are getting the same friendly email. It usually has a picture of a wrapped present on it and a line like “Give yourself a little holiday breathing room.” The offer is simple: pay a small fee, skip your December car or personal loan payment, and use that money for gifts, travel, or the heating bill instead.
I get the appeal. A few hundred dollars freed up in December feels great. But the fee printed on the offer is only part of what you pay, and on a typical used car loan the real number can run close to ten times that fee. Before you click “apply,” run the numbers.
How Skip-a-Pay Works
Most credit unions run some version of this program, and a handful of banks do too. The rules vary, but the basic structure is the same everywhere. You request the skip ahead of your due date, the lender charges a processing fee, and your payment for that month simply doesn’t come out.
The payment isn’t forgiven. As Patriot Federal Credit Union explains, the skipped payment moves to the end of your loan, which usually pushes your payoff date back by a month. Interest keeps accruing the whole time.
Fees tend to fall in the $25 to $30 range. American Southwest Credit Union charges a $25 non-refundable fee for its Holiday Skip-A-Pay, and it only applies to December payments. Vantage West Credit Union charges $30 per loan, and it spells out the catch plainly: finance charges continue to accrue at your original rate, and skipping results in higher total finance charges than paying as scheduled.
Eligibility rules are fairly consistent too. Mortgages, home equity loans, and credit cards are almost always excluded. Auto loans and personal loans are the usual candidates. You typically need to be current on the loan, have made at least a few payments, and not have skipped in the past 12 months. Vantage West, for example, requires the loan to be open at least four months and wants your request in 10 business days before the due date. ASCU wants at least three payments already made.
The Math Behind One Skipped Payment
Here’s where the fee starts to look small.
According to Experian’s State of the Automotive Finance Market data for Q2 2026, the average used car loan was $27,852 at an average rate of 11.19%. The average new car loan was $43,610 at 6.35%.
Take that average used car loan on a 60-month term. Your payment works out to about $608 a month, and if you pay every month on schedule you’d pay roughly $36,493 over the life of the loan.
Now say you’re two years in and you skip your December payment. Using a simple-interest model like most credit unions use, that one skip adds about $249 in extra interest over the remaining life of the loan. Add the $30 fee and the December breather costs you around $279. That’s for $608 of short-term relief.
The new car example is a little gentler because the rate is lower. On the average $43,610 loan at 6.35%, your payment is about $850. Skipping one payment two years in adds roughly $183 in interest, or about $213 once you include a $30 fee.
So the true cost of skipping isn’t $25 or $30. On a typical loan it’s somewhere between $200 and $280, and most of it shows up years later when you’d otherwise be done paying.
Why It Costs More Than It Looks
When you skip, your loan balance doesn’t shrink that month, but interest still piles up on the full amount. On simple-interest loans, your next payment goes to that accrued interest first, so less of it reduces principal. Your balance stays higher for the rest of the loan, and you pay interest on that higher balance every month until the end.
The other thing that bugs me about these offers is the timing. They show up when you’re most tempted to say yes, and the bill lands so far in the future that it’s easy to ignore. On a five-year loan, the extra cost mostly hits in year five. You won’t connect it back to the December you skipped.
Repeated skips make it worse. Patriot FCU notes that skipping every six months on a 72-month auto loan would add about a year to the loan and could leave you owing more than the car is worth. That’s why lenders cap how often you can do it.
Compare It to Your Other Options
Here’s a comparison that surprised me when I ran it. The Federal Reserve’s G.19 consumer credit release puts the average credit card rate on accounts that pay interest at 22.36% for the third quarter of 2026. That’s twice the average used car rate.
But if you put that same $608 on a credit card and paid it off in full by your January statement, the interest would come to about $11. Carry it for two months and you’re still around $23. Neither of those is a great habit, and I’m not telling you to fund Christmas on plastic. The point is that a short, deliberate one or two month gap costs less on almost any tool than a skip that quietly charges interest for years.
The cheapest option, of course, is to have the money sitting somewhere already. If you have even a small cushion in a savings account, borrowing from yourself for one month costs you a few dollars of lost interest at most. If you don’t have that cushion yet, that’s a good January project.
Another option worth a phone call is your lender itself. If December is tight because of a real hardship (a job loss, medical bills, a big repair), ask about hardship deferment or a payment plan instead of the marketing version of skip-a-pay. The terms may be better, and the person on the phone may be able to waive the fee.
When Skipping Might Make Sense
I don’t think skip-a-pay is always a bad deal. If the alternative is overdrafting your checking account, missing rent, or paying a late fee and taking a credit hit, a $25 fee plus a couple hundred dollars spread over several years can be the lesser evil. A skip approved by your lender doesn’t count as a late payment, which matters a lot if you’re trying to protect your credit score.
It also makes more sense on a loan that’s close to paid off or carries a low rate. The less time left and the lower the rate, the less extra interest you rack up.
Where it doesn’t make sense is when you’re using it to buy gifts you’d otherwise skip, or because the email made it sound like free money. A good test: if you’d hesitate to put this spending on a credit card at 22%, hesitate here too. The roughly $279 a skip costs on that average used car loan is about what you’d pay carrying $608 on a 22% card for two years.
What to Do Before You Say Yes
Pull up your loan statement and find three numbers: your current balance, your interest rate, and the months left on the loan. Multiply your balance by your rate and divide by 12. That’s roughly one month’s interest. The extra interest from a skip usually comes out higher than that (in the used car example, one month’s interest was about $177 and the skip added about $249), and the gap grows the more time you have left. Then add the fee.
If that total looks worth it for the breathing room, go ahead. If it doesn’t, keep making the payment and look for the slack elsewhere in your December budget. Either way, you’ll be making the choice with the full price in front of you.
