Advertising pitches and discounted goods can often lure shoppers into unexpected purchases or holiday expenditures beyond their means. As Extension Coordinator of Family and Consumer Science for the Bartow County Cooperative Extension Service, Kathy Floyd regularly teaches classes on credit management and family budgeting. This winter she offers advice on safe and smart holiday spending.
"If you deal in cash, you don't typically have a problem in going overboard. It's the credit cards that gets us into trouble with that," Floyd said. "Really, we get most of our issues with overuse of credit cards and not paying attention to what we're doing with that.
"There are some great deals to be had; it's just making your list and staying with it and having some control when you get to the store."
According to a survey by the National Retail Federation, American consumers will charge less this year than before. An estimated 27.6 percent of shoppers will use credit cards for gift purchases this year, the lowest amount since 2002 recorded at 26.5 percent.
Floyd's primary tip for consumers looking to shop smart this holiday season is to take time in preparing a budget thereby setting a cap on spending.
"A lot of us will go shopping and buy things that are not on our list because the buys may be so good," Floyd said. "Sometimes -- just from lack of self-control -- we get sucked into purchasing things and kind of get wrapped up in the moment and excitement."
A good way to set a budget is by being proactive, Floyd said. She suggests creating a Christmas savings account at your bank or credit union. By setting aside money all year, the gift-giving budget is prepared and delivered to the customer sometime in November.
For those planning to use a credit card, the government has created a new set of laws regulating the industry and how creditors communicate with the public. Changes included cardholder opt outs, increased notification of rising interest rates, older age restrictions, elimination of double-billing cycles, minimum payment disclosure and new statement regulations.
"Credit cards have undergone such a tremendous transformation in the last year with the new credit card act and it's much easier for you to see when you get your bill what kind of long-term debt you have put yourself in," Floyd said. "I encourage people to read [their statement] carefully, it's a lot of words for a small message. So you have to plow through some of it but they have made things a little bit easier than they use to be to understand exactly what kind of debt you've gotten yourself into with a credit card."
An addition to monthly statements included the minimum payment disclosure; customers can now see the consequences of paying just the minimum balance. In her courses, Floyd uses a simple example using a balance of $1,000 with a 17 percent interest rate. Paying only the minimum balance, it would take over seven years to pay off the balance owed.
One pitfall common this time of year is signing up for a plethora of store credit cards. Floyd warns that while they may work for some with the added incentive of an initial discount, for others it may not be a wise decision. It takes discipline to use the cards wisely then put them away. For many, if multiple cards are kept at hand the temptation to use them regularly will prevail.
"We tend to make more impulse purchases with those kind of cards if we keep them. So having one card that's a multi-purpose card may serve you better than having a lot of individual cards," Floyd said.
Although Black Friday has come and gone, Christmas shopping will continue for nearly a month. Tomorrow marks the shopping holiday known as Cyber Monday where customers look to online stores for discounts and free shipping. Floyd sees this venue as an opportunity to score deals without the threat of impulse buys but she warns online shoppers to be careful with whom they shop.
"A lot of people will avoid the malls, of course, and do their shopping online and there are lots of specials there as well. Reputable suppliers are your key there, people you've dealt with before," Floyd said. "It's a great way to avoid impulse shopping, you can get on the Internet and find exactly what you want."
For more financial planning advice from the University of Georgia Extension Agency, visit www.fcs.uga.edu/ext/econ/.