Budget shopping for the holidays

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WILMINGTON, Del. --  While some consumers may spend more this holiday season than they did last year, many still plan to limit their purchases. Twenty-seven percent of the Americans who responded to Gallup's annual poll last month said they plan to spend less on holiday gifts than they did last year. When they shop, consumers are leaving their credit cards at home. Seventy percent of the participants in a recent National Foundation of Credit Counseling online poll said they plan to pay for holiday expenses with cash or debit cards this year.

"Consumers may rely on cash and debit cards for a number of reasons," said Deanna Booker, Community Outreach Manager for Consumer Credit Counseling Service of Maryland & Delaware. "Some are just more aware now that they've redefined their financial priorities. They understand how easy it is to pile on debt and how hard it is to get, out from under it once they owe too much. Other consumers may have less access to credit this year, because they already are in financial trouble. Either way, it makes sense to avoid the temptation to overspend."

Paying with cash or using a debit card is a smart way to limit holiday purchases; however, consumers who choose this option may give up certain protections they would receive if they used a credit card instead. The Fair Credit Billing Act allows consumers to contest a credit card charge for products that are poor-quality or damaged provided they cost more than $50 and were purchased within 100 miles of their home.

Some debit cards also provide consumer purchase protection. If they use a debit card, the money is almost immediately drawn from their bank account. This means they have less leverage, because the merchant may receive payment before the consumer realizes something is wrong with the purchase.

Whether using credit cards, a debit card, or cash, it's easy to overspend during the holidays. Consumers are constantly bombarded by advertising this time of year and feel pressured to meet their families' or friends' expectations. There are so many ways to spend -- on gifts, entertainment, decorations, travel, and shipping. Consumers often don't realize how much they've spent until they've gone too far.

"It's important for people to have a holiday budget in place even if they plan to use a debit card or cash for purchases," Ms. Booker said. "Otherwise, they could end up without money for essentials -- like food or rent -- at the end of the month. They should start by taking a look at their financial situation. Given their current income and expenses, how much can they realistically afford to spend this season? Using that amount, they should decide how much to spend on each item. Then stick to the game plan. Follow their list and shop with purpose."

Whether shopping at the mall, online, by phone or mail, here are some ways to shop smart and stay on budget:
  • Comparison shop: A "sale" price isn't always the "best" price. Some stores offer discounts on merchandise for a limited time; others offer discounted prices every day.
  • Ask about price-matching policies and sale adjustments: Merchants may be willing to match, or even beat, a competitor's price to make a sale. If someone buys an item at a regular price, and it goes on sale the next week, they may be able to get a credit or refund for the discounted amount.
  • Use coupons: Coupons can be useful if they save money on what someone already plan to buy. Some retailers may even accept coupons from their competitors. But there may be restrictions. Check for expiration dates. People should avoid using one if it requires spending more than they budgeted.
  • Think before buying bargain items: "Buy One, Get One Free" sales may not be a bargain if someone doesn't really need or want the second item.
  • Shop online: Look at websites that compare prices. Before deciding to buy from an online merchant, people should make sure the site they're purchasing from is reputable and secure. Secure sites normally feature an https: in the URL address and/or a padlock logo. Also consider shipping costs and delivery time before making a purchase.
  • Save your receipts: They may be needed later for returns or exchanges.
  • Keep a spending record: List all purchases, as this will help stick to the holiday budget. If possible, also include important details such as order numbers, shipping costs and dates, warranties, and any return or refund policies that apply.
  • Avoid last-minute shopping: In a rush, people are more likely to forget their lists or make "impulse buys" due to pressure.
  • Ship early: If planning to send gifts to loved ones who live out-of-town, factor in the extra time needed for shipping. Waiting until the last minute can lead to costly express or overnight costs.
  • Review your success. Once the holidays are over, people should evaluate the year's holiday spending strategy. Did they stick to the budget? If they didn't, what caused them to spend more than they expected? What strategies worked well? How can they improve next year?
"The Air Force thrives on budgets," said 2nd Lt. Todd Newell, 436th Comptrollers Squadron Financial Services officer. "People should set themselves up to spend a fixed amount per family member. This mirrors what the Air Force does with its budget. They should set a goal and monitor how close they are to the goal periodically, so they don't bust their personal spending limit. Nothing beats proper planning and budgeting to make the holidays a financial success."

(Editor's Note: No federal endorsement of products intended. Facts attributed to Nancy Stark - Community Outreach Liaison CCCS of Maryland & Delaware, Inc.)