Tight Christmas

Christmas is just around the corner. No, I am not crazy. It's fine, and even late to consider Christmas in September. After all, if the retailers can start pushing the season before the Halloween pumpkins are carved, it's not too early to think about how you will pay for all of the frivolity.

Since the advent of the financial crisis, banks have been systematically pruning the ranks of their borrowers. Some banks have done this by quietly "forgetting" to send out replacement cards. Others have driven their interest rates to punishing amounts in the hope that the borrowers will find money elsewhere and close accounts of their own volition. Still others have cut credit lines to nothing. One friend of mine had her credit lines cut 80% just before a planned trip to India. She bitterly resented her earlier decision to pay down her debt from the proceeds of a court judgment paid to her as a result of a car injury.

For this and many other reasons, the wise are choosing to put their cards away and make other arrangements. Stores are noticing this. On September 10th, the major fashion companies and governments of eight countries are sponsoring a multi-pronged effort to remind strapped consumers that fashion is a major generator of wages, but what is one to do when our own wages are at risk?

One example of a growing trend toward frugality and reduced use of credit is the decision of Sears and Kmart among others to revive the lay-away plan. This ancient scheme allows the customer to lend a merchant his own savings in an unsecured, non-interest paying account in return for the privilege of having the merchant set the desired purchase aside until paid in full.

For a variety of reasons this benefits the customer not a bit. A layaway plan deprives the customer of one of his greatest strengths-the ability to walk away. The customer may enjoy the spectacle of seeing his purchase put on sale while he is forced to pay full price or he may see the same or an equivalent purchase available at another vendor for less.

Furthermore, the money is not segregated or insured. In the event of a merchant's bankruptcy-a real possibility in an economy where several venerable chains have vanished within the last year such as Sharper Image, Circuit City, Linen n' Things and Bombay Furniture, and where others are quickly pairing stores in an attempt to maintain their own viability, the customer may find that his layaway money is just another asset of the merchant to be divided among his creditors.

Instead of biting when offered a layaway, a canny customer may wish to bring cash and make a counter-offer of an all cash deal in exchange for a good discount. After all, Visa, Mastercard, Discover and American Express may charge the merchant as much as 5% of the purchase price in exchange for allowing the merchant to take their cards. This tactic is best used in smaller stores during quiet times and should be made to the store owner, not one of his clueless flunkies.

Sears and Kmart are also offering a somewhat more palatable alternative: a promotion that allows customers to store funds on prepaid gift card that can be activated for as little as $5.00 between now and October 31st. The customer has until the end of the promotion on November 14th to finish adding the money and will in return receive a bonus of 3% of the card's final value.

This promotion has the advantage of offering a form of "interest" on the customer's money. If you are certain that you will shop in either of the stores, it may well be worth it. Don't tell let anyone know I said this, but a wise customer would keep his money elsewhere and add the funds just in time to get the 3% on the final value. After all, you receive the same discount whether you give them the money in August or on October 31st. (I'm sorry, a former bank teller couldn't resist mentioning that.)

If you would like more flexibility, a traditional bank "Christmas Club" or an ordinary bank account that requires low minimum balances will probably work better. Internet bank pioneer, home.ingdirect.com/ allows customers to segregate a bank account into several sub-accounts designated for different purposes. For those used to the "envelope system" of budgeting, this brings a touch of old-fashioned familiarity into a high-tech world.

Don't be afraid to discuss what is available at your local brick and mortar bank as well. Many bankers will work with parents who want to get their little darlings used to saving their pennies. Bankrate www.bankrate.com/ offers an excellent resource to determine what is available both on and off-line.

Don't be afraid to investigate hand-crafted gifts: home baked goods, forced bulbs, flowering plants divided and potted into festive containers, flavored coffees, herb-infused vinegars, spice mixes, fruit infused spirits, crocheted blankets and so on. Any one of Amy Dacyczyn's excellent Tightwad Gazette books offers many practical and thoughtful ideas for cooks and crafters.

Consider buying merchandise through Ebay or purchasing discounted gift cards through reputable sites such as Cardavenue www.cardavenue.com/, Plastic Jungle www.plasticjungle.com/pub/about or Gift Card rescue www.giftcardrescue.com/. Although these sites tout big savings, discounts of about 10% seem to be the norm. They may also be feature weird amounts or short expirations. No problem if you intend to be the one doing the buying with them.

Here's dreaming of a tight Christmas.

Sources:
www.nytimes.com/2008/04/15/business/15retail.html

www.incentivemag.com/msg/content_display/incentive/gift-card/e3ifab6e78a9e8ce1b3f28cbf882241038b

If you like this article you may also like:

My round-up of the best and least expensive times to enjoy New York's cultural resources:
www.associatedcontent.com/article/2085059/seeing_the_new_york_sights_when_you.html

or

Roll-over Ripoff, which exposes a shameful theft of the retirement savings of the newly-unemployed:
www.associatedcontent.com/article/2085059/seeing_the_new_york_sights_when_you.html

Here is the link to all of my articles:
www.associatedcontent.com/user/583548/mary_finn.html