Holiday Shopping and Credit Tips

November 1998

Credit "Do's" and "Don'ts"

Reduce credit card debt. If you already carry a credit card balance, consider not using your credit cards this holiday season.
Pay by credit card if you can pay in full when the bill comes and you might have a dispute later with the merchant. If you have to pay before delivery or installation, or the product is complex and you might discover defects when you use it, paying by credit card can give you extra protection. The Fair Credit Billing Act allows you to defend against payment of a valid credit card charge if you show that the merchant failed to resolve a problem with the goods or services. This "charge back" right applies if the item costs more than $50 and you bought it in your home state, within 100 miles of your state, or from the credit card issuer. It also protects you in online purchases.
Consider saying "No thanks" to "No payments, no interest for six months." Some offers of "No payments for six months" or "Zero interest until May 99" require you to pay finance charges from the date of the initial purchase if you don't pay in full before the end of the "no payments" period. Read the fine print. Don't accept this kind of credit unless you can pay it off before the due date.
Don't sign anything you don't understand.
Consider saying "No thanks" to offers to skip a payment on your credit card or loan. Read any invitation to "skip a payment" on your loan or credit card carefully to see if interest will continue to build up during the skipped period.
Don't take cash advances on a credit card. Cash advances cost even more than credit card purchases, because you also pay a fee of 2% or more of the amount of the advance, and because there is usually no grace period on these advances.
You don't need a store credit card. They usually have higher interest rates than standard credit cards.
Watch out for loan applications that look like checks arriving in your mailbox. By cashing such a check, you are in effect taking out a loan with the lender who mailed you the check.. These loans usually cost more than those from a bank or credit union. Tear up these checks before you throw them out.
Don't put your holiday bills "on the house." Don't use a home equity loan for holiday bills or credit card debts. Home equity loans should be used for specific, planned expenditures, such as tuition or home improvement. Taking a home equity loan to consolidate your debts can worsen your financial problems. If you can't pay back the home equity loan, you could lose your house.
If you have too many debts, get help. 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.

Checks and debit cards

Don't postdate your check. Banks don't check the dates before cashing your checks.
You can't stop payment on a debit card payment.
If your debit card is lost or stolen, report it immediately by phone and follow up in writing. Keep and compare your debit card receipts with your checking account statements and promptly report any errors. Issuers of debit cards have put caps on your liability for a lost or stolen card - from zero to $50, depending on when you report the card lost or stolen. You will have to work with your bank to get the money returned to your account.

Save your money: Don't buy the extended warranty

Extended warranties are a high-profit item with high commissions for salespeople: resist the hard sell. Fewer than 20% of products covered by an extended warranty are ever brought in for repair. Estimates of profit margins on service contracts range from 40% to 77%.

Consumer Reports reported in May 1998 that readers surveyed who bought extended warranties had paid about as much for those warranties as the average repair cost for the item.

Buying products with a solid record of reliability is the best way to avoid breakdowns. The annual Consumer Reports Buying Guide contains repair histories for major brands of home appliances, VCRs, TVs, and some other home electronic equipment.

Check to see if one of your credit cards offers an extended warranty. Read the fine print in your credit card agreement to see what the restrictions are and what you will need to have if you have to make a claim on the credit card extended warranty.

Catalog buying

If you order products by mail, phone, fax, or computer, a federal rule protects you if the seller can't make delivery within the promised time. The seller must notify you and allow you to cancel the order if a shipment cannot be delivered in the time stated in the catalog or advertisement (or within 30 days, if no time is stated).

On-line shopping

If you are new to on-line shopping, start with a small purchase, such as a book or CD. Be sure you are in a secure portion of the site before you give credit card or similar information. If you aren't sure whether the site is secure, don't input your credit card or other sensitive information.
Shop with someone you know. Would you order goods over the phone from a company you have never heard of? Use the same caution when ordering on-line.
Look for the seller's privacy policy. You can encourage companies to have good privacy policies by shopping only at sites that have and post a good privacy policy.

Returns

Always save your receipts.
Some stores will not give a cash refund for a returned item that was purchased with a credit card. Instead, they will only give a credit to the card with which it was purchased. Therefore, if you pay for a gift by credit card, the recipient of your gift can't trade in the gift for cash or get a partial refund when exchanging the gift for something that costs less.
California retailers must post a notice stating their refund or no-refund policy. If there is no notice, then the retailer must allow you to return goods for a refund or exchange with a receipt for seven days after purchase. Items marked "as-is," "no returns accepted," "all sales final," or similar words are exempt from this rule.
If the product doesn't work as advertised, promptly take it back to the retail seller and ask for a refund or replacement. If you are still dissatisfied, contact both the seller and the manufacturer in writing. Describe the problem and ask for specific action by the company (such as replacement). Be polite but persistent in pursuing your complaint. If you are not satisfied, complain in writing to the local District Attorney's office or consumer affairs office.

Get off those mailing lists

Pay cash if you want to reduce the number of new mailing lists your name is added to. You can usually remove your name from a mailing list by sending a request, with a copy of the mailing label, to the company that is sending you mail. To reduce the number of new lists you get on, send a request to be omitted from mailing lists to the Mail Preference Service operated by the Direct Marketing Association, a private trade group. This will reduce the number of mailing lists with your name. To get the best results, include all the variations of your name under which you receive mail. Write to: DMA Mail Preference Service, P.O. Box 9008, Farmingdale, New York 11735–9008.
To remove your name from lists for credit card offers, contact the Equifax Options/Trans Union/Experian common mailing list service at (888) 567-8688. A call removes your name from these lists for two years, a letter removes it permanently.

Prepared by: Gail Hillebrand
West Coast Regional Office
Consumers Union
1535 Mission St.
San Francisco CA 94103
(415) 431-6747

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