Lured by deep holiday discounts? Be smart about spending

CHICAGO - The holiday season is full of pitfalls that can drain your bank account.

If you're not careful, you can end up taking a year to pay for all the spending. More than 13 million shoppers are still paying off last year's holiday debts, according to Consumer Reports.

"You have to be smart," says Gail Cunningham of the National Foundation for Credit Counseling. "Know how much you can spend in advance and don't get caught up in the holiday moment."

Regardless of the size of your bank account, you'll save plenty if you can avoid common holiday traps. 

1. Discount fixation. Retailers advertise deep discounts to get you to bite. But don't take them at their word without comparing prices. A store's sale price may reflect a markdown from the regular price, but there's no guarantee the manufacturer's suggested retail price isn't actually lower. Think more about the item you're buying.

2. No budget. Skipping a holiday spending budget is a surefire way to overspend. Make a list that includes amounts for each person you want to buy a gift for and stick to it. Be sure to create an overall budget that factors in other holiday-related expenses. The American Financial Services Association Education Foundation offers an online worksheet to help; visit afsaef.org/HolidaySpending. cfm.

3. Debit dangers.Using them on big items is risky because they don't offer the purchase protections that credit cards do. If you have a problem with a purchase it will be much more trouble to get your money back and take longer than if a credit card had been used, the National Foundation for Credit Counseling says.

4. Return policy missteps. Tossing receipts can be costly. Their obvious value is for exchanges or returns, but there's another plus too: If the price is lowered after you buy an item, a receipt could enable you to get a credit for the difference.

5. Being low-tech. Smart phones are changing how we shop. Scores of consumers are following their favorite brands and retailers on social networking sites likes Twitter and Facebook, and retailers are taking full advantage. Coupons and last-minute offers can arrive as e-mail alerts or through social network accounts.

6. Extended warranties. Greg Daugherty, executive editor of Consumer Reports says to skip them. The manufacturer's warranty should protect you against any defect for up to a year, and the cost of protection beyond that generally isn't worth it. Put some extra cash in your emergency fund to help cover repairs or replacements.

7. Gift card gaps. Give gift cards another look if you've spurned buying them because of fees and other issues. Thanks to recent rule changes, this is the first holiday season in which any gift card purchased cannot expire for at least five years. What's more, inactivity and other fees are banned in the first year.

8. Shipping costs. Free shipping is easier than ever to find. Giant retailers are dangling it as an inducement to spend.

9. Store credit cards. Saving 20 percent on a single large purchase might sound worth it. But remember that retailers promote their store cards because they come out ahead on interest and late fees. Signing up for a store's credit card and then canceling after a short period can harm your credit score.

10. Exposing your ID. Take precautions to avoid becoming a victim of identity theft. Only do business with websites that are properly secure.

11. Fear of negotiating. Prices frequently are negotiable in electronics, jewelry and department stores. Consumer Reports surveys on haggling have found that shoppers are successful more often than not when they ask for a better price. Just make the negotiations friendly.