Posted on Saturday, 12th December 2009 by admin
Now that Thanksgiving is over, the holiday shopping season is in full swing.
But be careful. While giving gifts can cheer both the giver and the receiver, and could provide a welcome boost to the economy, hidden fees and caveats may wind up costing more than you expect.
Cash or credit?
This is probably a bigger debate this year because of the recession, since people have seen the consequences of overextending credit. Leaving aside credit problems among the nation’s banks and businesses, the average American credit card debt is $8,400 and the average family pays $1,200 a year in finance charges alone, according to the Orange County Rural Development Advisory Corp.
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And people often spend more than they planned at holidays, whether it’s because they get caught up in the spirit or because they buy gifts with credit and don’t pay off the balances quickly. A survey conducted by Consumer Reports in October found that about 13.5 million Americans still had not paid off last year’s holiday shopping bills.
It’s something Faith Piatt, the Advisory Corp.’s director of housing services, sees all the time.
“I have definitely over the last year seen an increase in the number of people that are overspending at the holidays,” she said. “The biggest thing I’m hearing right now is people complaining, I don’t have the money, how am I going to buy Christmas gifts?”
Her advice: Be green and use cash.
“You feel the effects of the cash immediately, so there is no surprise at the end of the month,” she said.
But that has its downsides, as well. Most credit card purchases offer buyer protection in case of a dispute with the seller or identity theft. Cash doesn’t offer that advantage.
Consumer Reports’ advice? Use a credit card for big purchases, as long as you’re not carrying a balance and can pay off the bill each month.
Overdraft fees
Many people plan to avoid credit card interest by paying with their debit cards this year — that’s what 20 percent of the 1,000 people surveyed by Consumer Reports plan to do.
But that comes with its own pitfall.
Many banks will now approve a debit card purchase even if you don’t have enough money in your account, then charge you an overdraft fee, sometimes as high as $39, according to the Consumer Federation of America.
So before you swipe, make sure you have enough to cover the purchase.
Gift cards
Many givers who aren’t sure what those on their list would like best often opt for gift cards. But many cards come with fees, expiration dates and “dormancy fees” that deduct from their value over time.
And some people never even use them.
Sen. Chuck Schumer estimated last year that about 1.3 million people in the Hudson Valley would buy $189 million worth of gift cards, and that $52 million worth of those cards would never be used.
Laws in New York prohibit gift card sellers from charging dormancy fees for the first 13 months after a store or mall gift card is purchased, and federal legislation will prohibit dormancy fees for a year after last use and prohibit expiration for five years from purchase, but that won’t take effect until next year.
Consumer Reports advises people to generally avoid gift cards altogether, and New York state Comptroller Thomas P. DiNapoli is reminding consumers to use any gift cards they got last year, and to double-check fees and other conditions before buying gift cards.
The holiday spirit
But the bottom line, Piatt tells her clients and friends, is that the holidays are not about spending money on loved ones. They’re about spending time. So she and her daughter bake cookies — about 100 dozen planned this year — and give them out as gifts.
“That’s how we spread the love,” she said.
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Tags: Full, Holiday Shopping
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