Plan carefully so credit card debt and ID theft don’t dampen your holiday cheer.
Smart Holiday Shopping Tips for Christmas
The holidays are a time for love and cheer, but they can also be a time for credit card debt and identity theft if you don’t have a solid holiday spending plan. This video offers winter holiday shopping tips that can help you keep credit card debt minimized and reduce your risk for ID theft.
[On-screen text] Holiday Shopping Tips
Narrator: Use a list of who you are shopping for and what you plan to buy, and stick to it!
[On-screen text] Make a plan! Don’t get distracted by retailers’ “bargain” ploys.
Narrator: As items pile up in your shopping cart, keep a running total of what you’re spending.
[On-screen text] BUDGET! Know your exact budget ahead of time.
Narrator: If you have children, help them set a gift budget and prioritize their shopping.
[On-screen text] And use Consolidated Credit’s holiday spending worksheets
Narrator: Check return and exchange policies before purchasing anything. Double check if the online policy is the same as the in-store policy.
[On-screen text] Stores crack down on their RETURN POLICIES during the holidays
Narrator: Many retailers ship multiple items individually and this could mean more fees.
[On-screen text] BEWARE of shopping costs!
Narrator: Credit can be good when used responsibly. If there’s a problem with your purchase, you might be able to get the credit card company to help. Plus, if you have a credit card reward program, you could rack up points while shopping.
[On-screen text] Shopping with credit cards offers greater security protection
Narrator: Many retailers also test out a sale to see if it will be successful.
[On-screen text] Shop the day before BLACK FRIDAY.
Narrator: Always ask in advance about possible pilot sales, especially when shopping for big ticket items.
[On-screen text] Especially for BIG ticket items!
Narrator: And remember, safety first. Be aware of your surroundings at all times. Locate the security officers, in case there is an emergency.
[On-screen text] Watch your personal belongings at all times. SAFETY FIRST
Narrator: For more holiday shopping tips, visit ConsolidatedCredit.org
[On-screen text] Consolidated Credit: When debt is the problem, we are the solution. www.consolidatedcredit.org, 800-995-0737.
How much will the average family spend this year?
According to the National Retail Federation, the average shopper expects to spend over $900 this year – $902, to be exact. That’s an increase of more than $25 per person from last year. About $641 of that amount will go towards gifts, while $261 is being spent on food, decorations, and other seasonal items.
Tip No. 1: Start shopping now to spread out your holiday budget
Not only do holiday shoppers plan on spending more this year, but they’re also shopping later. The NRF found that only 45% of shoppers planned to “browse and buy items” before November.
“I think at least some shoppers are getting tired of retailers starting holiday promotions earlier and earlier every year,” says April Lewis-Parks, Financial Education Director for Consolidated Credit. “But the earlier you start shopping, the more paychecks you have to spread out the cost. This will help you stick to cash instead of pulling out plastic for your holiday expenses.”
The idea is to work out your holiday budget, making sure to include all the expenses you need to cover. That includes not only gifts but also decorations, food, postage and shipping, travel expenses, hosting expenses if you’ll have guests and money to cover any costs for holiday parties. Consolidated Credit has created a free holiday spending planner to help you capture all these costs. We’ve also created a spending checklist to make it easier to get your holiday plan started.
“Once you know how much you need to spend and what you need to buy, you can divide and conquer,” Lewis-Parks continues. “Take some time this week to look at deals coming out for Black Friday and Cyber Monday. These two shopping days are usually the best time to buy gifts. Decorations get cheaper the closer you get to Christmas. So, you probably don’t need to rush out and buy those this weekend unless you plan to deck the halls over the next few days.”
Tip No. 2: Consider non-holiday purchases carefully, even if they offer big deals
“According to the NRF, last year the average household spent $321.41 on holiday purchases over Thanksgiving weekend,” Lewis-Parks continues. “That’s just the average, and that doesn’t take into account non-holiday related items. If you’re going out to purchase essentials – especially electronics – your tab will be much higher. But be careful that you’re actually getting a good deal and that you’ll be able to pay off the purchase quickly. Otherwise, if you’re only making minimum payments, then monthly credit card interest charges will quickly offset those Black Friday savings.”
For example, let’s say you spend $1,000 on electronics on Black Friday and you save $100 on your purchases. But you put the purchases on a credit card with 20% APR because you can’t afford to make it in cash. If you only make minimum payments, it would take 128 months to pay off the balance in full. You’d pay $1,196.95 in interest charges. That’s right – you’d spend more than the original amount purchased just on accrued monthly interest charges. In other words, you saved $100, but you spent $1,196.95 extra. That’s not exactly a big deal.
“Black Friday and Cyber Monday are definitely times when you can score some really nice deals,” Lewis-Parks says. “However, if you don’t have the cash to take advantage and you’re already increasing your credit card balances with holiday spending, you may be better off waiting for a different sale at a different time of year.”
Tip No 3: If you can’t stick to cash, be strategic about using credit cards
Credit cards can be an extremely useful tool during the holidays. However, they also make it easier to overspend and amass high-interest rate debt that’s tough to pay off. When used correctly, you can maximize the rewards you earn while you minimize interest charges and the risk of debt problems. If you can, avoid cards altogether and opt to use cash. You won’t get rewards points or other benefits, but you’ll get peace of mind by sticking to your budget!
Use these tips to help you avoid a holiday debt hangover in the New Year.
#1: Start with zero balances
Credit card rewards are quickly offset by interest charges brought on by high credit card APR. However, there is a way to use credit cards interest-free. If you start a billing cycle with a zero balance, then pay off all the purchases you make within that billing cycle, no interest charges apply. So, in order to ensure the 3% cash back that you earn isn’t offset by 20% APR, you must start and end the billing cycle at zero.
If you don’t do this, interest charges will offset any rewards earned within 2-3 billing cycles, depending on your APR. In this case, it doesn’t make sense to use a rewards credit card. You don’t actually earn anything overall and they tend to have higher interest rates. That means it will cost more money to eliminate the debt.
#2: Aim for low APR
If you purchase a big-ticket item that will take some time to pay off, don’t use a rewards credit card. The same is true for making a series of purchases that will need to be paid off over time. If it will take more than 3 billing cycles to pay off a debt, don’t bother with a rewards credit card. Instead, opt for your credit card with the lowest APR. That way, it will cost you less money to pay off the debt as you work your way back to zero.
#3: Consider a prepaid card
More and more, people are opting for online shopping instead of hitting the store. However, the busiest online shopping season of the year also means it’s the worst time for identity theft. The last thing you need on top of your holiday spending is the hassle of dealing with identity theft. There are some easy ways to minimize that risk.
One way is to use an online payment processing service like PayPal. If a retailer gets hacked or your transaction isn’t secure, the thief still can’t access your PayPal unless they also have your login and password. Even if they do, they only have access to the funds loaded into your account. If you keep this amount limited, then it also limits your risk.
If you don’t use PayPal, consider getting a prepaid credit card. This is a card that functions like a debit card. You load the card with funds and then purchases are deducted from that amount. The difference between prepaid credit and debit is the liability you have if someone hacks your account. With a credit card, liability is always limited to $50. However, with debit, the liability limit depends on when you report the theft.
The Federal Trade Commission updates FTC guidelines on credit and debit protections, so make sure you know your rights depending on when you report a lost or stolen card or unfamiliar charges.
Holiday Budgeting Guide
Financial PlanningNo matter how much people love the holidays or how well they’ve planned, many people find themselves frazzled at some point. This publication helps you develop a practical spending plan to cover all your expenses, from gifts and decorations to travel and entertaining. Learn how to enjoy the holidays without taking on debt.
Open Booklet Download BookletIf holiday overspending leads you into credit card debt this year, we can help. Talk to a certified credit counselor to make a plan and pay it off!
