Every January, there’s a proliferation of financial advice about how to recover from holiday-related spending. How about trying something different this year? Start strategizing now for ways to avoid running up those bills and starting 2013 with a mountain of debt in the first place. 1. Start saving now. Open up a no-fee savings account or a Christmas Club account. The Christmas Club concept predates our credit card-centric era, first becoming popular during the Great Depression and coming back into favor during the last recession. Offered by a number of local banks and credit unions across the country today, they instill savings discipline via tactics such requiring that you deposit a minimum amount each month or tacking on a penalty if you withdraw money early. They generally do earn interest, although like most other interest-bearing accounts today, rates aren’t anything to write home about. If you want to earn more interest, check out a high-yield online savings account, but only if you have the wherewithal to sock away that cash and not touch it until it’s time to make your purchases. Both Christmas Club and ordinary savings accounts will, for the most part, let you set up an automatic deposit so money can get funneled towards your holiday expenses without any additional effort on your part.
2. Use credit card rewards. Have a cache of points or miles? Take a look at your redemption options to see if they can be turned into gifts. You might be able to “buy” gift cards with your points that you can give or spend to buy presents. Some rewards programs let you buy merchandise like electronics directly. This is another way to purchase holiday gifts without dipping into your bank account, but be careful and figure out the cash equivalent of what your rewards are worth (merchandise often is marked up above what you would pay in a store). More credit cards and even some debit cards today also offer merchant-funded rewards programs, which can shave a percentage off the retail price you’d pay for purchases on the websites of certain retailers. (Look for free ship-to-store deals or free shipping coupon codes so your discount doesn’t get eaten up by shipping charges.)
3. Don’t open store credit cards. Yes, you’ll probably get 10% or 15% off, but retail cards can be trouble for a few reasons. First, opening new credit cards can deliver a hit to your credit score, especially if you open several within a short time period. The typically low credit limits of store cards also make it easier to max them out faster, another activity that looks bad on your credit report. This could cost you if you plan to take out a loan or try to refinance your home in the near future. But the more immediate problem with store cards is their high APRs. Some store credit cards charge as much as 25% or so in interest — just a few percentage points lower than many non-branded cards’ penalty rates. The stores and the banks that run their card programs count on large numbers of people not paying their balance in full, an especially likely scenario during the run-up to the holidays, when many people adopt a buy-now, pay-later mentality. If you absolutely have to revolve a balance, use a card with the lowest APR you can find.
4. Start shopping now. Retailers would rather not spill the beans on this little secret, but Black Friday isn’t the savings bonanza it’s made out to be. Sure, there are all the ads, and the doorbusters, and crazy hours that seem to creep further into Thanksgiving dinner every year, but a recent survey found that several other shopping holidays including Labor Day, Memorial Day , July Fourth, New Year’s Day, Columbus Day and President’s Day all offer a higher overall percentage of discounts. A second survey found that electronics — one of the most popular categories, especially when it comes to those much-hyped doorbusters — are actually cheapest in early December. So if you want to burn off that turkey and gravy shivering in a sleeping bag outside your local big-box outlet this Black Friday, be our guest — just don’t expect to score the best discounts.
5. Try gift card exchanges. On secondhand gift card markets like the one at PlasticJungle.com and GiftCardRescue.com, people list gift cards they’re willing to unload at a discount — maybe ones they received as gifts for retailers they don’t shop at — so if you’re looking for a brand they’re trying to get rid of, you can essentially buy yourself a discount. Obviously, the offerings vary from day to day on these sites, but a quick check turned up discounts on retailers like Build-A-Bear Workshop, Ann Taylor, Gap Kids, and the Sports Authority. The percentage off any given retailer varies widely among sites and even among sellers on the same site, so it pays to do some comparison shopping. If you don’t mind taking a “haircut” on the value of an unwanted gift card, you can also use these sites to sell unwanted cards and earn a few extra bucks.
6. Hit the dollar store. No, you don’t need to buy gifts here, but savings experts say dollar stores are a great source for dirt-cheap wrapping paper, greeting cards and decorations. If you do a lot of entertaining around the holidays, dollar stores are also good for disposable flatware, plates, tablecloths and the like. Julia Scott, founder of the blog BargainBabe.com, told TIME Moneyland earlier this year, “I snagged 20 holiday cards for a buck — the perfect investment for something glanced at.”
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