Don’t Make These 5 Credit Mistakes on Black Friday

Consumer protection, Money

The National Retail Federation has reported that 20 percent of retail sales occur between Black Friday and Christmas (40 percent for jewelry stores).  Shoppers are expected to spend an average of $741 this year.  While overspending during the last weeks of the year can be tempting — especially when deals scream to never appear again — you could end up ruining your credit if you’re not savvy. Avoid the following traps to keep your wallet and credit score from imploding this year.

5 Black Friday Credit Mistakes

1. Not Reading Return Policies

While many stores boast “hassle-free return” policies, it’s extremely important to read the fine print. A 90-day return with receipt may apply to many items, while certain electronics and promotional items have shorter return windows — and you may not get all your money back on promotional items.  Since you’re obviously shopping for gifts, check policies for returns without receipts (Target only lets individuals return up to $70 per year without a receipt).

2. Not Reading Between the Layaway Lines

Many stores are lowering or dropping layaway program fees this year, which can allow you to snag Black Friday deals without racking up debt.  Layaway does, however, have its drawbacks.  First, while Kmart and Toys R Us are dropping their fees for a limited time, Best Buy will charge a 5-percent fee on your total purchase; other stores charge a flat-rate, non-refundable fee of $5 or so.  Second, retailers cost a $5-15 cancellation fee if you opt not to go through with your purchase, so layaway is not a program for the indecisive.  Also, don’t expect a store to honor a lower price if the item’s price drops after you reserve it; wait until Black Friday or later in December to make your purchase.

3. Opening New Store Credit Cards to Snag a Deal

Stores will be very aggressive on Black Friday about getting you to sign up for store credit cards, offering additional savings for opening an account.  While the savings may be appealing, you’ll lose the savings to interest if you can’t pay the balance off quickly. As always, don’t use credit to buy what you can’t afford right now.  In addition, store credit card limits are typically lower, this could hurt your credit score since you’ll be using a larger percentage of your credit line as a result of having a low limit.

4. Using Credit Cards Unnecessarily 

Credit cards can be great for building credit, getting extra savings (with store-specific cards) and earning rewards — as long as you have the cash to pay off the balance before interest is tacked on. Otherwise, using cash or debit is best to prevent overspending.

5. Shopping Without a Plan

Do your homework before you shop. Many retailers are pricing low to clear out inventory that piled up during Hurricane Sandy, so unusual items may be on sale.  Don’t fall prey to impulse buys prompted by sales — make a list of items and watch ads ahead of time, comparing prices between stores rather than dashing from store to store to snag every deal in sight.

While the end of the year can be a great time to snag deals, hopefully you’ve been saving up all year to pay for that big-screen. Avoid debt traps by planning ahead, using credit only when necessary or financially beneficial, and only spend what you really have. Do this to avoid ruining your credit — and your Christmas — and waiting for the savings will be worth it.