Black Friday and Cyber Monday are fast-approaching, and like Boxing Day, they are among the most popular shopping days of the year. Stores proclaim big sales and unbelievable deals, but will you really be saving money? Before you open your wallet, ask yourself: Am I getting a deal or just acquiring burdensome debt? These guidelines can help you make the call.
7 Tips on how to avoid debt this Black Friday and Cyber Monday
It's so easy to give in to all the advertising around Black Friday sales and Cyber Monday deals. You hear them on the radio, see the ads online, and in between your favourite television programs. It's bombarding. So it's not uncommon that the first FOMO pangs of the season will have you pulling out your wallet and credit cards faster than you can say "deal or no deal." But if you end up spending more than you can afford (or in this case, pay off in full at the end of the month) all of a sudden those "amazing Black Friday deals" could be costing you hundreds of dollars more thanks to the interest on your credit cards. So here are a few tips to keep in mind to make sure you actually get the most out of Black Friday and Cyber Monday, and not just take on more debt that will end up costing you a lot more than you bargained for.
1. Set a spending limit
Make sure you have enough money to cover your necessities, such as housing, food, gas, and transit before you go shopping. You don't want to be left short after a spending spree. Keep a running total as you are making your purchases so you do not go over your limit. You could bring your limit amount in cash, and know you cannot spend any more once the cash runs out. Too often people spend more than they planned, with their debit and credit cards, and not only are they unable to purchase necessities, but they are left with large debts. Review your spending plan using Credit Canada’s free Budget Planner.
2. Set aside the money for your spending limit
You need to ensure you have previously saved money for your shopping trip. If you do use your credit card, will you be able to pay off the full amount of your purchase when your statement arrives? Remember, a credit card is a short-term, high interest loan. Just paying the minimum only covers the interest, which is an excessively high amount, and will it take you a long time to pay off the balance. For example, if you purchase a $300 item at an interest rate of 19%, making the minimum payment, it will take you 3.5 years to pay off the debt, and it will cost you $110.17 in interest charges. Whatever you saved on the purchase will be wiped out by the credit card interest. See Credit Canada’s Debt Calculator to find out what you are really paying in interest.
3. Plan your purchases
Is there a specific item you're planning to buy this Friday, such as this year’s Christmas gifts? Or are you just planning to cruise the mall to look for deals? If you are planning to do the latter, be prudent in your spending. Be sure to consider the consequences of any purchase and avoid impulse buying. A shopping spree is similar to a night of binge drinking; it may feel good at the time, but you may feel lousy the next day. A shopping hangover could leave you with a closet full of items you do not either want or need, and a huge credit card bill you cannot afford to pay off. So be sure before you go shopping to ensure you make a list of the items you want to buy and how much you want to spend, and stick to that. This doesn't mean you can't be flexible. If you see a good deal on something there is no harm in purchasing it, as long as it's within your spending plan. But beware— too many deals may cost you more than you can afford.
4. Comparison Shop
Are you planning to buy a new wardrobe, bedroom set, phone, TV or computer? Be sure to compare prices at different retailers, to determine the best deal. Ensure you have sufficient funds to make this purchase. If the retailer offers you an installment plan, such as no interest for 6 months, then be sure you have sufficient funds to pay off the full debt before the 6 months expire. After the 6 month period, all the interest you have not paid is retroactively added to your purchase, then after that you pay a high rate of interest on top of it. Also know that the retailer will pull you credit file. Too many credit applications will negatively impact your credit score.
5. Be careful who you release your personal information to
It's wise to comparison shop for an item online to find the best deal. Once you've determined which company you want to purchase it from, be careful before you release your personal and financial information in order to protect yourself from fraud and identity theft. Is the retailer a reputable company with a proven track record? Can you trust it with your personal information? If you have determined the best price using a savings app, it might be wise to purchase the item from the retailer directly instead of the app. When you purchase an item through a third-party, you may be giving sensitive information to a disreputable company, who could use it for nefarious purposes.
6. Consider Buy Nothing Day
Buy Nothing Day was created as a backlash against Black Friday. It encourages people to not spend the day shopping, and instead spend that precious time with your family or community. Not a bad idea considering how close we are to the holidays.
7. Debtors should avoid Black Friday and Cyber Monday
If you have a sizable debt, and cannot afford to pay off the balance, you should avoid these shopping spree days. Altogether, these purchases will only add to your mounting debt and cost you more in interest. Whatever savings are offered will not make up for the added stress, anxiety, marital strife, collection calls and excessive interest charges that crippling debt can cause. Contact Credit Canada to meet with a Credit Counsellor to discuss your debt. All our counselling is free!
Get out of debt with Credit Canada
As a not-for-profit credit counselling agency, Credit Canada Debt Solutions offers free credit counselling services and debt help. We can assist you to create a spending plan and empower you to get rid of your high-interest debt. Contact us today by calling 1.800.267.2272 to book a free counselling session with one of our highly trained and helpful Credit Counsellors.
If you do plan to shop, ensure you properly plan, budget, compare and are careful who you purchase from. This will ensure an enjoyable shopping experience without the aftermath of buyer's remorse.