Best Ways To Pay For Holiday Purchases
By Mary Pilon
November 25, 2009
You've figured out your
holiday gift list. The next question: paper or plastic? Generally, plastic has
the edge. While cash will get you discounts at some small retailers, using credit
or debit cards makes it easier to return merchandise. Plus, some credit cards
carry extra benefits for warranties and repairs.
Before you start charging
ahead, here's a look at some of the best ways to pay for different items on
your list this winter:
Plastic is especially useful here because pricey (and often prone to defects)
consumer electronics have high rates of return. Using a card generates another
paper trail in case you lose your receipt, or if a retailer is unwilling to
take a return. Also, keep in mind:
- Fees: When you're making
a purchase, ask about restocking fees charged by some stores for giving refunds
and whether the seller allows returns on merchandise that's been opened or
defective. If you can, get policies in writing.
- Perks: Card issuers such
as Visa and MasterCard may offer extended protection for disputes with merchants.
Benefits vary, so call customer service before you start shopping. See whether
any of your cardseven retail cardsoffer extended repair or installation
Again, plastic has the edge because of the ease of return. Plus, if an item
goes on sale shortly after you buy it, some retailersincluding Express
and Gapwill credit the difference back to your card or bank account, provided
you have the receipt and, often, the unused merchandise. However, there can
be deadlinesyou may only get a refund if you bring the receipt back within
10 or 14 days after purchase. So ask the retailer. Keep in mind:
- Return Policy: If the
recipient is doing the returning and wants cash, some stores will oblige;
others will only give in-store credit.
- Store Cards: Some stores
are still pushing retail cards, which give you 10% or 20% discounts for opening
a new account. But applying for a retail card counts as a hard inquiry on
your credit report, which will stick around for 12 months. If the discount
is deep on a large purchase, think 20% off or more, applying for a retail
card might be worthwhile. Check out retail card offers online before you hit
the store to avoid making an impulsive financial decision, Scott Krugman,
a spokesperson for the National Retail Federation says. "If you're an
avid fan of that retailer," Mr. Krugman says, "it might pay to have
- Extra Benefits: Some
retail cards offer additional benefits to card holders, such as early notice
on special sales or extra discounts. One card, the Sears Solution MasterCard,
offered through HSBC, allows customers to see their credit score through TransUnion.
Those who have Citi-issued Sears cards can get their credit scores through
TransRisk for free.
Billions of dollars go unused on gift cards every year and can present a hassle
for the recipient. Congress recently passed credit card reform that prohibits
some of the more onerous fees and rules surrounding cards, but the law does
not go into effect until 2010. As a gift, cash may be a simpler solution. But
If you decide to take the gift card plunge, consider:
- Hidden Fees: Watch out
for reloadable cards, which behave like prepaid debit cards and may have dormancy
fees and fees for loading money or checking balances.
- Use a Card: Pay with
plastic and keep the receipt in case the card gets lost. Some major chains
will cancel the missing card and reissue a new one, a process made simpler
if you can easily recall when and how the gift card was purchased. Some retailers,
such as Crate & Barrel, allow recipients to register the card online,
making it easier to track. Otherwise, lost gift cards are often treated like
cash: gone for good.
- Bid Carefully: Some sites,
including eBay.com and PlasticJungle.com, hold gift card auctions, but fraudulent
gift card auction sites abound, warns Alison Southwick, a Better Business
Bureau spokeswoman. The organization's site, BBB.org, is a good tool for finding
out whether a Web retailer is legit.
Holiday Shopping Guide
The Wall Street Journal's columnists offer the best bargains and splurges of
Toys "R" Us is unrolling layaway programs for the first time this
year. Customers leave a deposit of at least 20% of the total price of the order,
plus a $10 service fee per order (not per item). Customers get refunds when
they cancel their order, but they forfeit a $5 cancellation fee, in addition
to the initial $10 fee. Layaway agreements typically have fairly clear terms,
but there are a few things to watch out for:
- Fine Print: Before signing
up, understand what happens if you miss a payment, change your mind or learn
that your item has gone on sale.
Big Box Retailers
Big retailers have dusted off Christmas clubs this year, a promotion rarely
seen since the days of rotary phones. It's probably too late to start a club
account this year, but file it away for next year. Some other options:
- Sears: With Sears and
K-Mart's Christmas Club accounts, shoppers set aside money for gifts, which
goes onto a gift card that can only be used at Sears-owned retailers such
as Lands' End and The Great Indoors. Sign-up ended on Nov. 14, but given its
popularity, Sears says the promotion is likely to be back next year. The store
kicks in a 3% bonus for cards activated before the Nov. 14 deadlineso
a deposit of $200 buys $206 in store starting Nov. 25, just in time for Black
Friday. The money on the card does not expire and requires a minimum balance
- A New Site: Historically,
credit unions have also offered Christmas Club programs. SmartyPig.com, a
saving-focused start-up, offers an online version, allowing customers to open
a high-yield savings account to sock away money for holiday spending. The
money saved can be redeemed as debit or gift card, or transferred into an
outside checking or savings account.
Here, cash may be the way to go this year. Many small stores are giving discounts
to customers who pay in cash, because store owners would rather knock a few
bucks off the price of an item than pay interchange fees to credit card issuers.
Jon Abt of Abt Electronics
in Glenview, Ill., says he's willing to consider offering discounts to some
customers who pay in cash at his store, and evaluates offers case-by-case. For
customers, "there's no harm in asking," he says.
- One caveat: Because cash
flow is tight for many shopkeepers, independent stores may offer less flexible
return policies or declare all sales final. (This is especially true for discounted
Large Online Retailers
Before you click "buy," review the return policy. Online retailers
are often more flexible than their brick-and-mortar counterparts, but some items
on deep discount simply aren't eligible for returns. Also know whether you'll
be on the hook for shipping returned items and how long you have to send something
back. Keep in mind:
- Amazon.com: This site
does not accept returns of items purchased from affiliate merchants that sell
through Amazon's site, so look at the merchant rating before you buy. Amazon
has some protections for dealing with third-party vendors, like their A-to-Z
Guarantee, but processing these refunds can take weeks.
- Portal Check: Many card
rewards programs, including those offered by Chase and Bank of America, have
online portals to shopping sites that give you extra rewards. Card issuers,
such as Visa, offer additional discounts for using their credit or debit cards
online, such as free shipping on purchases at BarnesandNoble.com or Overstock.com.
Small Online Retailers
Small online retailers, such as those that sell through Etsy.com, rely heavily
on electronic payment systems like PayPal for charging customers,. PayPal can
be a good solution if you're worried about the security of your information:
You only give your bank information to Paypal, so you don't need to worry about
giving your credit card number to a smaller vendor. Some tips:
- Letter Security: If you're
on a site where you pay directly by credit or debit, look for the "s"
after "HTTP" in the Web site's address, says Mr. Krugman from the
National Retail Federation. "The 's' ensures security."
- Research the Site: To
vet an online retailer, look at their user rating on a bigger site such as
eBay or Amazon, if they sell there. Google the name of the company, keeping
an eye out for any consumer forums where the site may have been discussed.
You can also run a search the Better Business Bureau's database at BBB.org.
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