Plan ahead for holiday shopping
November 7, 2008
It’s hard to believe that Thanksgiving is less than three weeks away! And we all know what Thanksgiving ushers in, the official start of the holiday shopping season.
Many people will rush to the stores in the early morning hours on the day after Thanksgiving, commonly known as Black Friday, to try to get good bargains on holiday gifts.
Before you set your alarm for 4 a.m. and prepare to deal with a crush of holiday shoppers, take some time to make a plan for yourself so that you don’t go overboard and end up with a post-holiday debt hangover.
The first thing I would recommend is to avoid shopping on Black Friday. People tend to spend more money when they feel stressed in a store, and if Black Friday shopping isn’t stress, I don’t know what its.
Take into account the following tips:
- Create a budget that includes all costs you will incur such as gifts, wrapping paper, stamps, baking ingredients, and entertaining.
- Make a list of everything you need, and set aside time to shop on a weekday when the stores are less likely to be crowded. You are more likely to overspend when the stores are crowded.
- Avoid last-minute shopping. You are also more likely to overspend when you feel rushed.
- Pay for as much as you can with cash. Put a designated amount of cash in an envelope when shopping, so you know exactly how much money is leaving your hands.
- If you use a credit card, rubber band a piece of paper to your credit card, and immediately write down the date, amount and merchant for each purchase.
- Use low-rate credit cards, and avoid using high-rate department store cards.
Be careful with store credit cards
November 5, 2008
The holiday shopping season is fast approaching.
Stores are starting to roll out sale prices and other special offers. There’s a good chance that at least once during your holiday shopping you will be offered a store credit card when you make a purchase.
These offers seem very enticing because you are usually offered a certain percentage off of your purchase if you sign up for a store card. There are several things to be aware of before you say yes to that card.
The store card may carry a very high interest rate. If you charge your purchases to this card and can’t pay it off immediately, you could end up spending more in interest charges then you initially saved.
Also, opening store cards could hurt your credit score.
First of all, every time a lender requests your credit report and credit score, it puts a little ding in your credit score. Your credit score may only be lowered by a few points, but if you apply for more than one card in a day, those few points are going to add up. This could be damaging if you already have a low credit score.
Second, when you apply for several lines of credit within a short amount of time, this shows up on your credit report. It could be a red flag to lenders who may wonder why you are suddenly in need of so much credit.
If you need to use a credit card while holiday shopping, you are probably better off to use a card you already have that has a low interest rate.
If you do decide to open a store credit card, make sure you know the interest rate and any fees associated with the card before you sign up. Only charge what you can afford to pay off right away. And finally, only open one card. Do not open cards at every store that may offer you a card.
Layaway is an option for buying holiday gifts
November 3, 2008
Layaway. It’s a term you don’t often hear these days. Some younger people may not even know what it means to “layaway” an item.
For anyone not familiar with the concept, a layaway is when you ask a store to hold a purchase item for you and you make payments until you’ve paid for the item in full. Then the store gives you the item. It’s a bit like buying on credit except you don’t actually have the goods in hand until you’ve paid for them.
I can remember my mom using layaway at Hills when I was a kid, mostly at Christmas. (Hills, which no longer exists today, was our favorite place to scope out Christmas toys. Their commercial slogan was, “Hills is where the toys are!”)
Like Hills, the concept of layaway had largely faded into oblivion sometime in the 1990s. But, it appears layaway is making its way back into retail stores.
Wal-Mart ended its layaway program a couple of years ago. Company officials said too few people were using the service to justify its expense.
But, that was before the emerging credit meltdown. After I saw this blog on the Wall Street Journal’s web site, I began to rethink the idea of layaway.
In general, I don’t advocate purchasing something unless you can afford to pay for it right away. That being said, if you are determined to purchase something, layaway could be a better option than using your credit card, or it’s an alternative if you don’t have a credit card.
There are generally some small fees associated with layaway, and you may be required to put down a deposit. After that you are expected to make regular payments (it could be weekly, bi-weekly or monthly) until you’ve paid in full. If you miss a payment and lose your layaway items, you will lose your upfront fees, but you should be able to get back any other money you’ve put toward the purchase.
Keep in mind that the individual stores make the rules when it comes to layaway. Make sure you understand all of the rules, fees and repayment terms before you sign up for the plan.
Here is the biggest benefit I see with layaway, you won’t be left with debt hanging over your head. The holidays are a time when many people end up charging what they can’t afford and paying for it well into the New Year.
You can do some web surfing or call stores to find out which retailers near you still offer layaway.
If you have any advice about using layaway or have a comment about layaway, please share.
-
SEARCH:
