The shopping season is over. But even the most carefully built budget may have crumbled if you fell for the tricks grinchy companies used to get you to spend more.
Paying more than you planned to on gifts may have damaged your finances more than you think. A poll conducted by the Consumer Reports National Research Center in October 2008 found that about 12 million Americans had not paid off their previous year’s holiday shopping bills. The experts at Consumer Reports Money Adviser recommend that, next time, you watch out for these traps:
Debit overdraft fees
As convenient as debit cards can be, you may have paid more than you expected when you shopped with one. For example, banks used to reject a purchase that exceeded the balance in an account. But many will now process the transaction and then charge customers an overdraft fee. Those charges range from $22 to $39 at 16 of the largest banks, according to Consumer Reports Money Adviser. In addition, more than 60 percent of the big banks impose additional “sustained overdraft” fees if the amount you owe is not repaid within a certain time period.
How to avoid it: Use a credit card for large purchases, especially if you pay your balance in full each month. Use a debit card for small purchases if you’re relatively certain you won’t need the extra protection a credit card provides, and you’re sure you won’t exceed your account balance. You could also stick to using cash.
Deep-discount price bait
Remember the early-bird “door-buster” sales promoting extensive discounts on a first-come, first-served basis? In a more deceptive version of these sales, an item is advertised at a super-low price on a Web site, but it’s just a come-on designed to get you to buy something else and spend much more.
How to avoid it: To protect yourself when you’re shopping online, be wary of unrealistically low prices. To be super-safe, stick with merchants you know. Don’t be worried you’ll miss out on a great deal if you skip door-buster sales. It’s very likely that another one will come along before the season ends.
Gift card fees
While gift cards can shorten your shopping time, CRMA generally advises consumers to avoid gift cards. Some come with purchasing and processing fees, expiration dates, transaction fees and inactivity fees that unfairly diminish their value over time. And the recipient could end up with a worthless piece of plastic if the company goes out of business or files for bankruptcy protection.
How to avoid it: If you can’t decide on an actual gift for someone, consider giving cash instead of a gift card. It can be used anywhere and carries no fees.
This holiday season, shoppers were expected to spend $1.2 billion on extended warranties for electronics and appliances. Salespeople push hard to get you to buy these service plans because retailers keep a nice 50 percent or more of what they charge for them.
But extended warranties are notoriously bad deals. Some repairs are already covered by the standard warranty that comes with the product. Consumer Reports’ data shows that products seldom break within the extended-warranty window — after the manufacturer’s warranty has expired and within the typical two to three years of purchase. And when items do break, the repairs, on average, cost about the same as an extended warranty.
How to avoid it: CR’s decades of brand research have demonstrated that products are reliable enough that you do not need extended warranties. But if an extended warranty gives you peace of mind, check your credit-card agreement before you buy one to see if charging an item on your card will provide similar coverage.