Consumers facing uncertainty, shorter holiday shopping season in 2002 (Nov. 2002)

But modest sales growth predicted; online sales continue gaining popularity.

AUSTIN, TX - Despite economic uncertainty and occasional doom-and-gloom news accounts, economists and retail experts are predicting the 2002 holiday retail shopping season will result in modest sales growth and that many retailers and online businesses will actually do quite well.

The National Retail Federation predicts that economic growth of 3.5 percent in the second half of 2002 will create a "solid enough environment for reasonably good holiday sales" of approximately four percent over 2001. Texas economists also see modest growth in consumer spending.

But just like with Texas weather, everything could change in a hurry. A series of factors make the 2002 holiday shopping season unique and mined with pitfalls:

• Consumer confidence at its lowest level in almost 10 years

• Leaner inventories by retailers means they have less to sell

• Jitters about job security and unemployment

• A shorter holiday shopping season (26 days rather than 32)

"While careful planning for holiday shopping is always sound advice, it may be even more so this year with the shorter season and all the uncertainty," says Rob Schneider, senior staff attorney for Consumers Union, publisher of Consumer Reports. "The longer you wait, the less options and more hassles you'll likely encounter. To avoid a holiday hangover, nothing beats having a good plan, setting a realistic budget and sticking to it."

Schneider adds it is wise to be prudent in holiday purchase decisions and to not equate how much one spends with how much one cares. "A little thought and preparation in gift-giving can bring us closer to the true spirit of the holidays," he said.

Following is Consumers Union advice for holiday shopping in 2002. Consumers can also visit the free holiday giving guide at www.ConsumerReports.org and get information on everything from online shopping and gift returns to kids' products and shipping gifts safely.

HOW TO PAY

SET A BUDGET AND STICK TO IT. The urge to buy on impulse during the holidays can be detrimental to your pocketbook. Remember that the best gifts are not necessarily the most expensive. A little creativity on your part can go a long way. Make a list of the people you plan to buy for, then record what you purchase, and the amount you spend as you go.

ASSESS SPENDING HABITS. The best method of payment really depends on how you spend money. If you tend to splurge more when you use a credit card, perhaps cash, check or debit is a more viable option to keep you on track. However, for goods that have to be delivered, or may be defective, you have better consumer protection when you purchase by credit card.

PAYING WITH CASH OR CHECKS. Don't send cash in the mail, and don't pay in cash or with a check or debit card when a product still has to be delivered to you. Cash does have some advantages, such as keeping your name off of unsolicited mail lists and enabling you to pay in full for an item. However, a check enables you to pay in full without the added risks of carrying cash. When using a check, make sure that you have the money in your account to cover it on the day you write the check. Bounced check fees by the store and bank can be expensive, so carefully monitor your account. It is also possible to stop payment on a check if you have a dispute with a merchant, but you may have to act quickly. Sometimes merchants run your check through a machine and then return the original check to you. This electronic processing speeds up the payment on the check and makes it much harder to "stop payment" on the check.

DEBIT CARDS. A debit card is good if you prefer not to carry cash or write checks. But carrying a debit card is like carrying a checkbook full of signed checks, so use extra caution. Purchases made with a debit card are withdrawn directly from your checking account. And once you make a purchase, you cannot stop payment the way that you can with a check.

If you're an Internet shopper, don't give out your debit card number online, lest it fall into the wrong hands in cyberspace. Since purchases made with a stolen debit card are equivalent to someone taking cash directly out of your bank account, you may experience financial difficulties while you are working with your bank to reverse the charges.

If your debit card is lost or stolen, report it immediately by phone then follow up with notification in writing. Issuers of debit cards have put liability caps on lost or stolen cards from $0 to $50 depending on how quickly you report the card missing. Whoever is in possession of your card (or card number, if they found it online) can make purchases up to the purchase limit, or up to the amount that you have in your account plus any overdraft protection, as most retailers don't require the use of your PIN number. Keep receipts and compare them with your bank statements, and immediately report any discrepancies. You will have to work with your bank to get your money back.

CREDIT CARDS. Credit cards can be very useful, especially for items that have to be delivered or that might get broken. However, it is much easier to become overextended with a credit card, so try to restrict purchases to what you can pay in full when the bill arrives, and try not to use a credit card if you are already carrying a balance.

By using a credit card, you will have more leverage to return a product than you would if you were to pay with a debit card or cash. The Fair Credit Billing Act gives you the right to defend against payment of a credit card charge if you show that the merchant failed to resolve a problem with the goods or services satisfactorily. This rule applies only if the item cost more than $50 and was purchased in your state, within 100 miles of your home, or from the credit card issuer.

Avoid using store credit cards if you can't pay the bill in full every month. Store credit cards tend to have higher interest rates than bank-issued credit cards, which most retailers accept. Also, stay away from credit card advances, which can be a costly way to borrow money. There is a fee (generally two to four percent of the total cost of money borrowed) and often the interest rates on the borrowed money are higher than rates on regular credit purchases.

HOME EQUITY LOANS. Don't use these to pay your holiday bills or credit card debts. Taking a home equity loan to consolidate your debts could worsen your financial problems. If you can't pay back the loan, you could lose your house. Rather, use these loans only for specific, planned expenditures, such as school tuition or home improvements.

INTERNET SHOPPING

BUY EARLY. As online shopping continues to acquire favor with American consumers -- more than 77 million U.S. adults now buy products online throughout the year -- e-tailers are getting a better idea of what to expect during the holiday rush. Most major Web sites now offer live or call-in customer service, or both, in addition to extras such as online order tracking and gift wrapping. The peak buying day for online shopping in 2001 was November 28 and online shopping tapered off approximately seven days before Christmas. So getting your order in early will help ensure that you don't encounter problems or have to pay extra for expedited shipping.

CHECK OUT CONSUMER REPORTS' E-RATINGS: ONLINE SHOPPING GUIDE BEFORE MAKING A PURCHASE. Consumer Reports' online e-Ratings provide our unbiased current assessments of how the most popular e-tailers score on consumer-friendly criteria such as privacy and security, return and shipping policies, ease of navigation and more.

DOUBLE CHECK PRICING AND TRUST YOUR INSTINCTS. If a deal seems too good to be true, it most likely is. Comparison-shop both online and off to make sure that you are getting the best deal for your money, particularly if you are bidding in an online auction. Compare the final price, including all shipping and handling charges, between e-tailers.

BE SURE THAT YOUR PERSONAL INFORMATION IS SECURE. Consumer Reports E-Ratings: Online Shopping Guide ranks e-tailers' privacy policies in addition to other criteria. Consumers Union also recommends carefully reading any merchant's online privacy policy to ensure that your personal information will not be shared or sold to third parties.

PAY ONLINE WITH A CREDIT CARD. Under federal law, your liability for unauthorized credit card charges is limited to $50. In fact, some credit card issuers and web site operators say that under certain circumstances they will even cover that amount. The level of protection with credit cards is also better than with other forms of payment such as cash on delivery, certified checks, and money orders. Credit cards are safer than debit cards, which you should avoid using online because of the additional risks posed if your debit card number is stolen.

KEEP ALL RECORDS OF ONLINE TRANSACTIONS. Make printouts of:

• Web pages indicating the company's name, phone number and address.

• An order confirmation page, or similar page, with a description of items ordered.

• The site's policies for returns, security, etc.

• Any correspondence you exchange with the merchant, including e-mails in which you give notification of product defects and the merchant's responses.

• *Make sure that all of these browser-page printout items are dated. If not, write the date on them.

RETURNS

SAVE ALL RECEIPTS AND PROOFS OF PURCHASE. If a purchase doesn't work as advertised, promptly return it and ask for a full refund or replacement. If you are still dissatisfied, contact the merchant and manufacturer in writing. Be persistent in pursuing your complaint. If you are not satisfied, complain in writing to the local district attorney's office or consumer affairs office. If you buy a gift your recipient might have to return, consider paying cash for it. If you pay for the gift by credit card, some stores will not refund cash to the recipient upon the item's return.

FOR ONLINE RETURNS, CHECK OUT THE SITE'S POLICY BEFORE BUYING. Return shipping costs can be expensive, and some e-merchants charge a restocking fee on returned products. However, many chain retailers will allow you to return or exchange purchases made online to one of their brick-and-mortar stores, provided that you furnish a receipt. Some other e-tailers will pay shipping costs for returned products. With online purchases, you have the same rights as you would if making phone or mail-ordered purchases, so it is imperative to keep records of all communications with the merchant.

You should also ask for a gift receipt. The gift receipt encodes the amount that you paid, so that your recipient can get a full refund or a full credit for the amount paid even if the item goes on sale after the holiday. The gift receipt does not show the amount, but rather it is encoded in the receipt so that the store can still determine the price paid.

SEEK HELP IF DEBT BECOMES A PROBLEM

If you have trouble with your debts, contact the nonprofit Consumer Credit Counseling Service in your area to help you budget and to negotiate a payment plan with your creditors. Call 1-800-777-7526 (777-PLAN) for a local listing.

CONSIDER ALTERNATIVES TO BUYING

It is easy sometimes to get caught up in yearly holiday shopping excess. As the malls become congested, consider alternative gifts. For example, a charitable contribution made in the recipient's name can be an ideal gift that exemplifies the true spirit of the holiday season. And don't forget that sometimes the best gifts are homemade ones.