Holiday Shopping Could Cost You More Than You Think

When asked to imagine a winter holiday scene, it might be fair to say that most people would picture a winter scene with stockings hanging from the mantel of a fire place and presents scattered beneath a decorated tree. A scene like this does not come free of charge, however; it costs money to put presents under the tree. And if families are not cautious, the choices they make during the holiday season could lead to having to file for bankruptcy.
Whether a family of lesser means, of wealth or anywhere in between, the holiday season presents a tempting opportunity to stretch budgets beyond reasonable means, risking putting the family in a difficult financial position as the new year begins.
Consumers have options of how they choose to finance purchasing gifts; all offer benefits, but all also present financial risks if consumers are not careful. A CBS News article highlights three common ways to finance purchases: credit cards, debit cards and cash, and layaway.
Credit cards allow consumers to purchase items under the promise of paying the credit card company at a later date. As CBS News notes, many credit card companies offer special promotions during the holidays, allowing consumers to more quickly accumulate rewards points. If people are able to pay the balance of their credit card bill during the next billing cycle, credit cards may offer a great way to purchase gifts. However, if a person buys more than they can easily afford, the interest that accumulates on a carried credit card balance can quickly create a very difficult financial situation.
Debit cards and cash present a way to purchase gifts without fear of accumulating interest. But, paying for presents in this manner is only available to people who have the cash available to spend. If people are not careful, using a debit card can quickly deplete their checking account.
Layaway plans allows people to put presents on hold at stores after paying a small down-payment. People then save money until they are able to pay the remaining balance. As the CBS News article states, stores do not offer layaway in an effort to be helpful to consumers, but rather as a way to make money and help make sure the store does not lose sales to customers with no credit or with limited financial resources.
If used responsibly, credit cards, debit cards and cash, and layaway plans can help people put gifts under the tree this holiday season. However, if people overextend themselves financially, they may find them in situations that require solutions for regaining control of their financial situations, such as filing for bankruptcy. Bankruptcy may offer people a way out from under a mountain of debt, including credit card debt, to gain a fresh start.