5 tips to steer clear of debt in holiday shopping

[November 19, 2012]  CHICAGO (AP) -- Black Friday deals are starting early this year, and that means more pressure to spend spend spend.

As the holiday shopping season expands and retailers make impulse buys ever-easier via smartphone and otherwise, consumers have to be extra-disciplined to avoid money trouble.

Many are willing to indulge. The National Retail Federation forecasts holiday sales to rise 4.1 percent to $586.1 billion this year, a bigger increase than usual over the last 10 years. Shoppers are expected to spend an average $749.51 in November and December, with many shelling out much more.

Weak economy? What weak economy?

Unfortunately, many will take months to pay off the goodies they bought for loved ones or (shh) themselves at doorbuster deals and other special offers.

Among the potential debt traps for the unwary this year:

• Special Black Friday shopping hours actually begin on Thursday, Nov. 22, at major retailers, even as early as 8 a.m. on Thanksgiving Day. Ramping up the temptation level, websites tracking Black Friday sales have been sending emails with "leaked" sales specials since Halloween.

• Some credit card issuers have mailed blank checks for their customers to use, just in time for the holiday shopping crush. Interest rates on these cash advances can run 20 percent or more if you don't pay off your card within the prescribed period.

• Card issuers increasingly are attaching spending requirements to generous rewards and bonus offers they dangle ahead of Black Friday, making you spend with their card in order to earn them. That's sinking a much bigger hook into the consumer than the past trend of merchants offering peeks at their sales in exchange for Facebook "likes."

"Opening a new credit card just to get a `deal' is never a good idea," says Jeff Somogyi, an editor at deal aggregator Dealnews.com. "Getting into a new financial entanglement just to get a jump on Black Friday sales is probably an even worse idea."

This doesn't mean you have to shun all holiday sales in order to remain financially responsible.

But remember: Smart spending for the holidays isn't all about finding the best deals. It's important to be on your toes to prevent Black Friday and the days surrounding it from dooming you to too much debt.

Some tips to keep spending under control and debt, if any, to a minimum:

1. HAVE A PLAN.

Make a list of who you're shopping for, what items you hope to find and how much you intend to spend on each person. Stick to it! Your plan should call for you to start your shopping online, at least to compare prices and look for deals before you head for the stores. Avoid impulse purchases. And don't wait until the last minute to start shopping; it's a sure prescription to spend more.

2. LIMIT CREDIT CARD USE.

Keep the use of credit to a minimum. If you must use it, put your charges on one credit card -- the one with the lowest rate if you carry a balance. Remove all other cards from your purse or wallet. Don't apply for store cards just to snag one-time discounts. The ideal approach it to not charge a single item unless you can repay in full when your next bill arrives. At least set a target date to zero out the balance before you run one up.

3. BEWARE OF SPECIAL CARD OFFERS.

In addition to rewards and bonus deals, issuers are tempting consumers by offering incentives such as no-interest balance transfers, extra perks by meeting certain spending levels and increased cash back in specified categories. Resist the bait. Companies know that many won't; that's the reason total consumer credit card debt is close to $600 billion. "No deal is a good deal if you can't afford it," says Gail Cunningham of the National Foundation for Credit Counseling.

4. USE LAYAWAY.

Take advantage of the resurgence of holiday layaway programs. Retailers from Kmart and Sears to Toys R Us and Wal-Mart have lowered or waived fees this year that shoppers pay to participate in these interest-free, pay-over-time programs. With stores eager not to lose customers to the competition, debt-conscious consumers can snag gifts at attractive prices while not having to pay an extra fee just to avoid buying with their credit cards.

5. GET CREATIVE.

Find it difficult to stick to a holiday spending budget? Give gift cards and make something personal to go with them. Or give experiences instead of "stuff" -- perhaps a shared hike, nature outing or special home-cooked meal. Or volunteer together at a soup kitchen, homeless shelter or nursing home if your gift recipient doesn't want more material items, suggests Pamela Yellen, a financial services consultant and personal finance author. The gifts people remember the most, as she points, are often free.

[Associated Press; By DAVE CARPENTER]

Personal Finance Writer Dave Carpenter can be reached at http://twitter.com/scribblerdave.

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