November 22, 2004
by Andrea Coombes
SAN FRANCISCO (CBS.MW) -- When it comes to worrying about pocketbook issues this holiday shopping season, pickpockets should be the least of your concerns.
Instead, consumers should be on guard against the friendly offers pitched by their favorite stores, charities, banks and credit-card companies. Otherwise, you'll pay more than you need to, possibly for a very long time.
Consider, for example, that favorite holiday treat: "No payment or interest due for a year!" You think you'll pay off the bill before the interest clock starts ticking, but many consumers get hit with the full interest charges at the end of the term by a little-known due date hitch.
Then there are those appealing gift cards that let you shop anywhere Visa and MasterCard are accepted. The convenience is nice; the steep fees are not.
Shoppers need to ask questions, read the fine print and not let a misguided sense of pleasing loved ones push them into spending beyond their means.
"Stores, banks and others know how much people want to be generous over the holidays. It's very easy to take advantage of people's desire to give to their loved ones," said Karen Gross, professor at New York Law School and president of the Coalition for Consumer Bankruptcy Debtor Education.
Remember, "it's your money and you control it," Gross added. "Only you can make decisions about where it goes and why it should go there. Keep that in mind as others try to take money from your pocket and put it into theirs."
Consumers will spend an average of $702 this year, up 4.5 percent over last year, with total holiday spending estimated to reach almost $220 billion, according to a National Retail Federation survey, conducted by Bigresearch, of 7,800 consumers.
That said, consider doing your utmost to avoid the following yuletide shopping errors:
Don't jump into 'pay later' deals
Sure, paying later without being charged interest can be a good deal, but be wary before signing up for a "don't pay until 2006 deal," according to Gross.
First, find out what the product would cost if you paid cash now. Some retailers jack up a product's price to offset lost interest payments.
Second, make sure you know when to pay the bill in full. Often, consumers charge the product to a credit card and expect that the final payment due date, usually a year or 18 months into the future, will match their credit-card's billing cycle.
Not so, Gross said. "What frequently happens is that the money is carried on a credit card that has a billing cycle that doesn't coincide with the program payment period," she added.
That means your final payment for the product could be a month too late -- and a full year's interest will then kick in. Monitor the specific date the final payment is due.
Don't click on links in e-receipts
Maybe you know a phishing e-mail when you see a near-perfect imitation of your bank's corporate identity, but where will e-mail scammers venture next in their efforts to get personal financial information?
As retail activity heats up closer to the holidays, expect to see fake shopping-confirmation notices from your favorite retailers.
"[Scammers] are always one step ahead of you. I would imagine that's only going to get more sophisticated before the holidays," said Susan Larson, vice president of global content at SurfControl, which sells e-mail and Web filtering products to companies.
At this time of year, consumers on a tight budget may be particularly vulnerable to the lure of winning extra spending money through new phishing scams, including fake work-at-home opportunities or cash in exchange for completing an online survey.
"There are various ways they are going to offer the consumer a quick fix to a Christmas financial problem," Larson added.
Already, messages are appearing that promise a Wal-Mart or Macy's gift certificate for those who fill out an online survey, she said.
How to fight back? Never click on a link in an unsolicited e-mail message. One simple click could trigger a malicious program that logs any keystrokes you then make on your computer.
Far more common, however, is that the link sends consumers to a fake Web site, where they're asked to fill in personal information, which scammers then use to steal their financial assets or identity.
If you've got any questions about your accounts, exit the e-mail message and navigate to the company's Web site yourself, or call the store.
Don't ignore return policies
Don't shop till you drop thinking you can return anything you don't like. Some retailers are reining in their return policies, and customers who claim too many returns could get denied at the cash register. See full story.
Ask retailers about their policies and be sure to include receipts with gifts so your family and friends aren't stuck with what would otherwise be a lovely gift.
Donate directly, not from a phone pitch
The holidays may be for giving, but watch out for telemarketers asking for donations.
Charities are exempt from the do-not-call law, so there's no legal problem with the call. But they often hire for-profit firms to do their phone work for them. The problem: From 25 cents to 90 cents of your donated dollar will go to the for-profit company, said Trent Stamp, executive director of Charity Navigator, a Web site that researches and rates charities.
"A much smaller percentage of your money actually reaches its intended cause, and you fill up the coffers of a for-profit telemarketing company, which I'm not sure was your intention when you decided to give to charity," Stamp added.
"If you get one of these phone calls and the charity sounds good to you, the best thing to do is hang up the phone, research the charity and go contact them directly."
Don't overlook gift-card fees
This year, 74 percent of consumers plan to buy gift cards, up from about 70 percent last year, and they'll spend more than $17 billion on the cards, up from $100 million last year, according to a National Retail Federation survey of 7,300 consumers.
But some consumers will spend more for the privilege than others. Buying a bank-issued gift card is convenient -- you can make purchases anywhere MasterCard, Visa or American Express is accepted -- but you'll pay $5 to $10 for the card itself, while store gift cards have no such up-front fee, according to Consumer Reports Money Adviser.
Also, many cards have expiration dates and nonuse fees. That means recipients could pay up to $10 a month in the months they don't use the card. Check with the store or financial institution before you buy, and if you receive a card as a gift, find out when it expires.
Know your 'cross-default provision'
No matter how tight your budget gets this season, avoid delaying payment on any bills.
While it makes sense to get credit-card bills paid quickly to dodge late fees as high as $39, note that if credit-card issuers see that you're late on other bills, they're likely to raise your credit-card rates.
"Even if you pay your credit card exactly on time, if you fail to make any other payment -- say you don't pay your phone bill, you pay your landlord late, you pay your mortgage late -- that nonpayment becomes an event of default under your credit-card agreement and they bump up your rate to the high default rate," debt educator Gross said, adding that creditors routinely monitor credit reports and other payment databases.
In addition, this is a good time to recheck your credit cards' grace periods, as well as the date and time your credit-card bills are due.
"For example, if the company says all payments must be received by Nov. 1 at noon and your payment is received on Nov. 1 but at 12:45 p.m., that payment is late," Gross elaborated. "You get charged a late fee, and under many of the credit-card agreements that's a trigger to move your interest rate."
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