No Need to Be Scrooge in Order to Be Prudent

The Christmas shopping season is here. But for many consumers, not being a Scrooge can lead to disaster.

The Yuletide season is the worst time for consumers already burdened with debt to overextend themselves further with huge credit card bills. As much as one fourth of annual charge volume typically is incurred during the holidays, experts say.

“Credit cards can give you a false sense of security at this time of year,” says Elgie Holstein, director of Bankcard Holders of America, a consumer group in Herndon, Va. “You can get caught up in the spirit of giving now, without having the money to pay the credit card bills when they come due later.”

Retailers and credit card marketers aren’t helping matters, brazenly egging on undisciplined spenders to pop out their plastic. MasterCard and Visa, for example, are offering special contests that make cardholders eligible to win a prize every time they use plastic during the holidays. Visa’s grand prize is an offer to pay bills up to $1 million over five years; MasterCard will provide up to $18,000 annually for 10 years.

The holidays are treacherous for another reason: The time is ripe for credit fraud and theft, Holstein says. More crooks are looking to steal your card number to order merchandise or use your personal information--name, address, phone number and social security number--to apply for credit in your name.

Here are some tips from financial experts on how you can control your spending without saying, “Bah, humbug!” to the Christmas spirit:

- Use a low-interest-rate Visa or MasterCard. More retailers are accepting Visa and MasterCard, which in some cases charge lower rates than retailer cards. However, if you always pay off your account in full at the end of each billing period--as do about 40% of cardholders--you could still use store cards because they typically don’t levy annual fees.

- Draw up and stick to a holiday spending budget. Base it on what you realistically can afford. Make a list of gifts you will give to see if it meets the budget. Avoid spur-of-the-moment purchases.

- Keep a running tab of what you spend and compare it to your budget. One idea: attach a slip of paper to the back of each credit card and write the amount of each purchase as you go along.

- If there’s any doubt about what you can afford, don’t use credit at all. Stick to cash. Withdraw a certain amount of money from your bank account and let that be your limit. Don’t spend any more.

- Consider ways to reduce your gift-giving burden without losing the Christmas spirit. Draw names among family members to decide who will give gifts to whom. Or make it a point to give gifts that are thoughtful and creative rather than expensive.

- Beware of deferred payment plans. Finance charges usually will accrue during the deferred payment period and can be high enough to double the cost of your merchandise over a long enough period. If you can’t afford it now, you probably can’t afford it three months from now, Holstein says.

- Get rid of extra credit cards. One, maybe two, bank cards should suffice. More will add temptation and sock you with annual fees while increasing your risk and hassle if they are stolen. If you need a higher borrowing limit, call the bank and request one rather than keeping another card.

If you need help setting up a budget or managing your debts, free or low-cost credit counseling services are available from Consumer Credit Counselors, a nonprofit organization with 400 offices nationwide.

For referrals to an office near you, call (213) 386-7601 in Los Angeles County, (714) 547-8281 in Orange County, (619) 224-2922 in San Diego County, (714) 781-0114 in Riverside County and (805) 644-1500 in Ventura County.

What about avoiding fraud? Holstein offers these tips:

- Carefully guard your credit card. Never lend it to anyone.

- Destroy carbon copies of your credit card transactions. Whenever possible, keep your card in view when you are making purchases.

- Read your billing statements carefully to make sure your card has not been used by a thief. Keep all receipts and compare them to items listed on your monthly statement.

- If you find unknown or unusual charges, write to your card issuer immediately and dispute the charges. You are liable for up to $50 of unauthorized charges before you report a lost or stolen card, but you’re not liable for any purchases after you file a report.

- Never give your card number over the phone unless you know the company is reputable.