Keep Holiday Debt in Check

Mark Wolff



Savvy shoppers—more than half of Americans (52.8%)—already have started the hustle and bustle of holiday shopping, according to the National Retail Federation's 2012 holiday spending survey. That's up from 51.4% of Americans who had started their shopping this time last year.

Make a budget, and a list

Decide how much you can afford to spend and stay within that spending plan. Staying within budget will be much easier if you make a price list of all gifts and other holiday items you plan to purchase. Even if it's a more general list rather than a detailed one, it still will help you avoid overspending and impulse buys.

Check it twice

Make sure your list includes not only gift or gift recipients, but also everything you'll need for all the projects and activities that make up your holiday. It's easy to overlook extra expenses for holiday foods, party clothes, holiday décor, and postage. Examine each item and ask yourself, "Does it earn its place in our celebration?" You might discover how much you're doing just out of habit or perceived expectation.

Comparison shop

You easily can save more than 10% on most items, sometimes considerably more, by comparing prices at different stores. The Internet and smartphones have made comparison shopping that much easier. When shopping online, shop wisely. Be sure you're purchasing from a secure site and review emailed statements for accuracy as you receive them.

Make time your ally

The reason to start sooner rather than later is that when you delay, you pay. At the last minute, you have to settle for something, and it might cost more than you wanted or planned to pay. After Christmas is a good time to shop for next year's presents. You can find some great bargains right after the holidays. Then tuck those gifts away until next season—just don't forget about them. Another benefit to starting early: It gives you more time to find the "right" gift and avoid impulsive decisions, which too often leave you less happy with your purchase.

Pay off debts quickly

You're less likely to overdo it if you pay in cash. If you must make holiday purchases using credit, use a lower-interest card (you'll often find lower rates on credit union cards) and pay off this debt as soon as possible. Don't borrow more than you can repay in several months. Remember that credit card debt is relatively expensive. And if you only make the required minimum monthly payment, you might never pay off the debt.

Plan for next year by opening a Holiday Club Account

While these accounts don't pay much if any dividends/interest, they provide a practical way to save small amounts over time. Ask at your credit union or bank to automatically transfer funds from your checking account to your Holiday Club account every month. The discipline of saving reinforces your good budget intentions.

See what's in your supply drawer

You may have more wrapping paper, ribbons, unused cards, and gift boxes stored away from last season than you realize. Use up those holiday supplies first to trim down the amount you'll have to buy this season.

Understand how layaway programs work

An old holiday standby—store layaway programs—have re-emerged over the past few holiday seasons, allowing consumers to put items on hold at the store and pay for them over time. Before deciding to use layaway, know the payment schedule and read the fine print. Be realistic about how these payments will fit into your spending plan and what you can really afford. Understand the layaway policy including time between payments and schedule of payments, service fees, late and cancellation fee policies, refund and exchange policies.

Be smart about gift cards

The rules today significantly restrict gift card expiration dates and fees compared with several years ago. But those who give or receive a gift card still should read the fine print. And if you get a gift card, use it sooner rather than later to avoid forgetting about unused balances on the card, or forgetting about the card altogether. And if you still have gift cards you received from others last year, use them to shop this year. It's a smart way to reduce your out-of-pocket expenses.

Pay attention to return policies

Some stores have tighter policies. Pay attention to the return policy when you make a purchase; keep receipts and note time limits, restocking fees, and other factors that may affect your recipient.

Find low- or no-cost ways to celebrate

Making a few changes can ease the strain on your spending. For example, draw names to limit the number of people for whom you purchase gifts; give homemade items; make your own gift wrap; organize a potluck rather than trying to make, and pay for, the entire holiday meal.

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Published November 21, 2012