Carefully plan your finances for the holidays or wake up with hangover in 2002

FOR IMMEDIATE RELEASE
November 15, 2001

CONTACT:
Rob Schneider (512) 477-4431, ext. 116;
Rafael Ayuso, ext. 114; or
Gail Hillebrand (415) 431-6747
Consumers Union, Southwest Regional Office

Carefully plan your finances for the holidays
or wake up with hangover in 2002

Rewarding good value for money helps both consumers, economy
(More on Holiday Shopping from ConsumerReports.org)

AUSTIN, TX - Depending on which study or forecast one chooses to cite, retail holiday spending in 2001 is expected to either increase or decline by as much as 3% compared to last year. This 6% pendulum swing has retailers and economists scratching their heads trying to make accurate predictions in the midst of uncertain times.

Two facts are generally agreed upon. First, most economists believe the United States is currently in or near a recession that was only exacerbated by the events of Sept. 11 and is causing consumers to spend more carefully. Second, the day-to-day events in the war against terrorism can profoundly impact consumer confidence one way or another and help determine which way the retail holiday shopping pendulum will actually swing.

"Planning and budgeting have acquired new significance this year," says Rob Schneider, a senior staff attorney for the Southwest Regional Office of Consumers Union. "More than ever, it is wise to be prudent in your purchase decisions and not equate how much you spend with how much you care. A little thought and preparation in our gift-giving can bring us closer to the true spirit of the holidays."

Some patterns expected to carry over into the holiday season are beginning to emerge. For example, consumers are spending more time at home and traveling less. High-end retailers are falling on tough times while discount stores, consumer electronics and home improvement retailers are either holding ground or making gains. Big-ticket items such as vehicles with zero-percent financing deals and home sales spurred by falling interest rates remain popular.

Following are some practical tips for holiday shopping in 2001.

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 total $50, so carefully monitor your account. It is also possible, of course, to stop payment on a check if you have a dispute with a merchant, but you may have to act quickly.

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 take extra caution with it. 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 our 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 state 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 2 to 4 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, 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 2000 was December 18, so getting your order in early will help ensure that you don't encounter problems or have to pay extra for expedited shipping. According to BizRate.com, online retailers delivered 87 percent of orders on time last year, up from 74 percent in 1999.

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 emails 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 re-stocking 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.

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.

More on Holiday Shopping from ConsumerReports.org

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Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers.

View Files Sorted By Office: Consumers Union OPI, New York - Washington DC Office
West Coast Regional Office - Southwest Regional Office - Consumer Policy Institute

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