How to shop smart for the holidays

Picture this: it’s January. The holiday roasts are eaten. There are still a few chocolates left, but the greenery has browned around the edges and is sitting in the compost bin. The presents have all been used at least once. And an eye-popping credit card bill is waiting in the mailbox.

For shoppers entering this week’s kickoff to the holiday shopping season who want to avoid a financial winter hangover, consumer advocates have advice. Make a budget, make a plan, stick to it and avoid credit, they advise. And it’s not just the much-ballyhooed PlayStation 3 or other big-ticket items that can stretch paying off the holidays into the spring.

“Little things add up more than if you just bought a big thing,” said Erica Sandberg of the nonprofit Consumer Credit Counseling of San Francisco. “It’s very difficult to control and keep track of spending when things you buy are relatively inexpensive, because you feel flush.”

The great risk, she said, is for families already overburdened with debt. The trend for this year seems to be that people will spend roughly what they spent last year on the holidays — around $1,000 per family, according to both Sandberg and Scott Bilker, author of “Talk Your Way Out of Credit Card Debt!” and operator of DebtSmart.com. However, some will have budgeted for their shopping and will pay it off quickly, while for others, the debt will become part of a larger load of outstanding consumer debt, Sandberg said.

“Is there a difference between $8,500 that you owe and $9,500 that you owe? Well, yeah,” she said.

She recommended first creating a budget for total gift spending. If there isn’t enough cash, she said, there’s a choice to be made: either cut back, work more hours or take a holiday job.

“Don’t go crazy. If you’re not able to buy a gift for someone, your loved one will survive. A lot of people spend on ridiculous things,” she said.

Joe Ridout with the Consumer Action of San Francisco also advised re-thinking that must-give impulse.

“There are many ways of experiencing the season or giving gifts that don’t involve materialism whatsoever. These are gifts that are often far more valuable to the recipient,” he said.

Both advocates have tips. Sandberg advised paying cash through a debit card for holiday purchases, so as to still enjoy the safety of not carrying cash. Shoppers who do use credit should create a plan to pay it off within a few months, she said.

But if you do use credit, that’s no reason to be at lenders’ mercy, Ridout said. He advised calling credit card companies and telling them that you’ll take your business to the one offering the lowest annual percentage rate, and seeing how far they’ll go. Bilker advises the same thing on his Web site, urging consumers to bargain with credit card companies for no interest on purchases for several months.

Ridout also advised avoiding gift cards, many of which don’t get used. They are essentially a free loan or free money for the company that issued them, he said. And be careful about store credit cards, he added.

Teresa Allman, 45, of Aliso Viejo found that out the hard way. An admitted holiday over-spender, the hygienist spent nearly $500 last year on charity presents at Target for the giving tree at her daughter’s school. She got the 10-percent-off Target credit card to pay for it but then lost a bill and made a late payment. The penalty? $30 — a significant chunk of her $50 savings.

“It unbelievable how much they make on late fees,” Allman said. “Be wary of those late fees. It’s a business and it’s very cutthroat.”

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