Today (the day after Thanksgiving) is traditionally known as "Black Friday". That seems like such a bleak term, but it means it's the day that retailers' balance sheets finally move from the red into the the black. Most stores count on a good turnout today; to ensure that turnout, they have big one-day sales. Consumers comply, and jam stores and malls (and mall parking lots). Some people do all their Christmas shopping in one marathon day.
With all that spending going on, one has to wonder how many people are paying cash? How many people actually saved up money for this? If past experience is any indicator, a large part of the country that's out shopping today will end up charging most of their purchases on credit cards, and paying on them for months to come. For the retailers, it's Black Friday - for consumers it's Red Friday.
The important point to remember is that saving money on a sale becomes moot if you charge the item and then pay it off over time. CCCS Notes
"Consumers must remember that they may end up in worse shape if they over use their credit cards for holiday deals," Howard Dvorkin, author and founder of the non-profit Consolidated Credit Counseling Services, warns. If you go out and charge a $1,000 this holiday season and are paying the minimum amount due with an 18% interest rate, it would take over 19 years to pay the credit card debt off and you would have repaid the creditor almost triple - $2,900. "If that doesn't dissuade people from overspending - I don't know what will. Consumers who start their holiday shopping without a strategy will likely end up adding to their debt load," says Dvorkin.
Believe me, I know about that. As I've mentioned before, I am "client" of CCCS, and working to become debt-free in a few years. I no longer have any credit cards (but the debt memory lingers), so there is no temptation on me to charge anything.
For those contemplating wading into the deep muck that is Black Friday shopping, here are some tips
to prevent it becoming Red Friday for you:
- Save up
- Set a budget before you shop
- Make a list
- Don't shop for yourself
- Ignore "big" sales
- Shop online first
- Leave your credit cards at home
- Don’t buy if you can’t afford to pay
(more detail at the link)
Of course - if you haven't already been saving up, the first tip comes a bit late. One other thing not mentioned is layaway. Many stores are returning to this as an option, and it's great because it forces the buyer to pay for the item in a set amount of time, and it's interest-free.
Atlanta consumer advocate and financial advice expert Clark Howard
has simple advice for people regarding their credit cards: freeze them in a block of ice. If you have to wait for the ice to melt before you can use them, you'll be less inclined to abuse them. This advice (like the previous Red Friday advice) can also work year round.
I know this seems like a strange topic for a political blog, but since the economy and debt is on everyone's mind, it seems apropos. We have little control over how banks and insurance companies handle debt, but we do have control over our own. Having been down the dark red hole, and slowly clawing myself out, I have first-hand experience as well.
Please - leave the credit cards at home. Don't make this a Red Friday for yourself.