Martin Lewis' credit card payment holiday warning – taking a break on credit card and loan payments WILL impact your credit

His advice covers mortgages, loans and credit cards payment holidays

'You don't want to take a payment holiday unless you need it', to quote Martin Lewis.

The nation's favourite Money Saving Expert Martin Lewis was back on This Morning on Monday to warn how new changes to extended payment holidays can have a big impact on long-term finances.

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Martin Lewis returned to offer his expertise for those worried about the financial implications of taking extended payment holidays on credit cards and loans.

Martin Lewis' warnings on payment holiday extensions

room with white wall and household bills in folder

(Image credit: Future PLC/Simon Whitmore)

'We've had two announcements in the last couple of days,' Martin explains on his 'Guide to Payment Holiday Extensions' special. Firstly 'We've had the confirmation that credit card and loan and overdraft help has been extended to the 31st of October'.

He warns the major thing to understand, that's changed since payment holiday were first introduced, is the new terms and conditions. It can now impact your ability to get future credit – which wasn't the case initially.

'While it won't be on your credit file there are other mechanisms which lenders can use to spot that you've taken a payment holiday – things like open banking and looking at your payment history.'

Martin warns, 'Lenders can see that's you've taken a payment holiday, if they're looking for that. It can impact your credit worthiness, and your ability to get future credit.'

Martin goes on to reveal that financial regulators have confirmed what he is saying. And so he goes back to his golden rule – 'only do it if you need it.' he exclaims.

bills banded with binder black clips

(Image credit: Future PLC/Polly Wreford)

Should I take a mortgage or credit card payment holiday?

Speaking of credit cards specifically, Martin says, 'The issue with credit cards is that the  interest rates tend to be higher. So by not paying the interest, it really ticks up,' he stresses.

'Now arguably, if you have to take a payment holiday and you had a mortgage and a credit card, you would be better off to take a bigger mortgage payment holiday and use the spare cash to pay the credit card,' Martin advises. 'Because the interest is lower on a mortgage than it is on a credit card.'

What is a payment holiday?

'Let me just remind everybody what a payment holiday is,' says Martin. 'In some ways, the term is a bit bit confusing.'

'Payment holidays simply mean you can defer paying for a product. If you're meant to pay each month, you don't have to make that payment.'

He goes on to explain these have been around for a long time. But what we have in place now are different types of payment holiday, designed especially for those finances struggling due to Coronvirus.

Martin also reminds us that we do have to eventually pay the amount back. And especially with credit cards, the interest will be racking up. 'Only do it if you NEED it,' the money expert strongly advises.

martin lewis

(Image credit: Getty Images / Ben A. Pruchnie / Stringer)

Martin explains that mortgage payment holidays have already been extended to the same time frame. 'so we're seeing the initial move now flow on,' he says.

The second announcement is, 'We've had proposals that car finance and payday loan help will be extended to the 31st October. That's currently out for a consultation,' he says. This basically means it's awaiting approval, but Martin seems to indicate that it will be available in a week or two, should all go to plan.

Related: Should I apply for a mortgage holiday? Martin Lewis says it could affect future borrowing

We're still not out of the woods as these are 'unprecedented times'. Always seek advice from your lender if you're unsure.


Tamara was Ideal Home's Digital Editor before joining the Woman & Home team in 2022. She has spent the last 15 years working with the style teams at Country Homes & Interiors and Ideal Home, both now at Future PLC. It’s with these award wining interiors teams that she's honed her skills and passion for shopping, styling and writing. Tamara is always ahead of the curve when it comes to interiors trends – and is great at seeking out designer dupes on the high street.