Holiday Shopping? Consider In-Store Financing and Other Offers Carefully
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When shopping for holiday gifts this year, you might have to make more decisions than just what to buy. Here are five that involve your money and personal information that you should consider carefully.
Signing up for a deferred interest promotion. When you're holiday shopping, an offer to pay 0 percent interest for six to 12 months may sound like a great deal, especially if you're purchasing a big-ticket item.
But deferred interest promotions, typically offered when you sign up for store credit cards, can tempt you to spend more than you can easily pay back.
Also, even though you won't have to pay interest for a period of time, be aware that interest still continues to accrue. If you don't pay off the entire cost of the item you purchase by the due date—or if you pay late or miss a payment—you'll be responsible for paying all that interest, warns Christina Tetreault, senior staff attorney for Consumers Union, the policy and mobilization division of Consumer Reports.
A better alternative, says Tetreault, is to only spend what you can afford to pay back without having to go into debt.
Taking out a store credit card. You've likely been offered a store card while checking out at the cashier. Sign up for it, and the retailer will give you a onetime discount off your bill—often 10 percent. That's a good deal and it might work for you. But it's important to remember that applying for a card can temporarily ding your credit score, a potential problem if you're about to apply for a mortgage or some other loan, says Maureen Mahoney, a Consumers Union policy analyst.
And if you don't pay off balances in full, store cards often charge higher interest rates than other credit cards, notes Tetreault. For instance, the Macy's credit card, offering new applicants a 20 percent discount when using it over the first two days, currently imposes an annual percentage rate of more than 26 percent on unpaid balances. Non-retail credit cards charge an average of 15 percent, according to Bankrate.
Paying for a service contract. Also known as an extended warranty, a service contract is not actually a warranty but a kind of insurance that's supposed to cover you if something goes wrong with a car, computer, television, cell phone, or other product. Like all insurance, you can spend a fortune protecting yourself from breakdowns and other problems that may never occur.
But if you choose to buy an extended warranty, it's important to read all the fine print and to know exactly what you're buying. You don't want to be surprised that something is not covered. "Accidental damage may not be covered and there may be clauses that allow the company to deny coverage,” notes the Federal Trade Commission on its website.
You also may not need to buy a service warranty if you paid with a credit card because some cards may provide extra coverage, extending the manufacturer's warranty by up to a year or more.
Buying from a pop-up store. A pop-up store that opens for the holidays in a mall or at a holiday shopping fair can make it easier for you to find the items you want. But while some pop-up stores are run by merchants that have year-round walk-in stores, others are temporary, says Katherine Hutt, spokesperson for the Better Business Bureau.
Before making a purchase, ask about the shop's return and exchange policy, and find out if there’s a way to contact the merchant once the shop closes, she advises. Pay with a credit card so that you can contest the charge if problems come up, she says.
Giving out personal information. Many retailers ask for information like your home and email address and phone number. But giving out that information can lead to marketing materials arriving in the mail.
If you are shopping online, a retailer that is extending you credit may need your home and email address to ship your order. But a walk-in store shouldn't need those details, Hutt says.
Also, unless an online retailer is extending credit to you, be particularly wary if you're asked for sensitive personal information, such as your Social Security number and date of birth. You should only give that out if you need credit but first, make sure you trust the source asking you for that information.
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