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6 Tips for Saving Money While You Spend for the Holidays

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That's right -- not only can you avoid taking on extra debt this month, you can make a buck or two for yourself.

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Saving money while you spend at Christmas? It sounds like an oxymoron, but there are smart shopping strategies that you can employ, to keep your bank account a bit more full, even while spreading holiday cheer.

Stay away from layaway. As credit and debit cards became more widely available in the last two decades, it seemed that the idea of layaway (holding an item in-store and making small payments on it through a stated period until it was "purchased"), was extinct.

Nevertheless, it has come back with a vengeance, thanks to a renewed interest in holiday consumerism, despite tightened credit, high unemployment, and a sluggish economy. This year's Black Friday and Cyber Monday spending both reached historic highs, according to the National Retail Federation (NRF)-proving one basic assumption that feeds the layaway revival: People are still buying what they can't afford.

Retailers advertise layaway as a way to make payments on purchases without paying the high interest rates that come with credit cards. But while it's true that layaway doesn't involve interest, it does come with a cost. Whether or not layaway is a better move than charging comes down to spending behavior. Without discipline, layaway can actually amount to more than credit card interest rates. For example, Wal-Mart (WMT) charges $5 after a customer puts a 10% down payment into the layaway purchase. However, customers can use credit cards to make small payments for a layaway purchase. If the balance isn't paid in full, that customer will ultimately pay both a layaway fee and interest on the credit card. If a customer decides to cancel the layaway purchase, or doesn't pick up the purchase within the days stated on the contract, there's a cancellation fee to pay. Bottom line: Don't buy what you can't afford now.

Know the refund policy. Not all stores offer full refunds for returned items, even with a receipt. Know the store's return policy before you buy-especially if you are buying a gift for someone else. "Restocking fees" (which are generally 15% of the purchase price) are common for technology, electronics, and large home appliances that are returned more than 14 days after the time of purchase. (This is the policy at Best Buy (BBY) and Wal-Mart). With the exception of iPhones and a special holiday policy which allows items purchased the 60 days leading up to Christmas to be returned by mid-January, Apple's (AAPL) standard return policy is not to accept any returns past 14 days, and that product must include the original receipt and original packaging. When in doubt, stick to retailers like Nordstrom (JWN), Zappos, and Kohl's (KSS). All refund unwanted merchandise in the full amount (with a receipt) for up to one year-and in some cases, beyond.

Clean out your drawers. Thanks to the CARD act of 2009, retailers must honor gift cards for five years from the date of issue, regardless of the amount of money on the card. Dig through your drawers to find those old gift cards, and use them toward your gift purchases. (Note: The physical card may have an expiration date, but your money doesn't. If you find an "expired" gift card, contact the company and ask them to send you a new one, or issue the remaining balance in cash). You can also sell gift cards at sites like Plastic Jungle, which will offer cash, or a different gift card in exchange. If you've got just a few dollars on a gift card, donate it to GiftCardGiver. Your "spare gift card change" will be compiled with proceeds from other donors to buy a gift card given to people in need.

Don't buy a gift card-without getting something in return. Gift cards are a popular item around the holidays, especially when "crunch time" to the gift-exchange looms. If you're a gift card giver, planning for your purchase will save you money. Sites like Plastic Jungle, Cardpool and Gift Card Granny also sell full face value gift cards at a discount (the recipient will be none the wiser). If you don't have time to shop online and wait for shipping, look into gift cards at your grocery store. Many grocers now offer fuel or grocery rewards to shoppers who buy gift cards from their store. If you're buying a dining gift card, stick to restaurants that will add on a gift card, for a larger purchase. (For example, many restaurants will throw in a $25 gift card if you buy $100 in gift cards).

Strategize your card use. If you plan to use your credit card and pay the balance in full each month, use the card that will pay you the most for your shopping this holiday season. The new trend in rewards cards is to reward more for certain categories based on the season, so make sure the card you use is giving you the most "bang for your buck." For example, Discover Card (DFS) offers a 5% cash back reward on dining and fashion purchases this holiday season-but only on the first $300 you spend. Chase Freedom (JPM) cards offer 5% cash back on dining, department stores, charities, and movie theatre purchases for the first $1,500 spent-but note that stores like Target (TGT) Wal-Mart, and gourmet food shops do not fall into the high-reward categories; purchases there earn just 1%.

Add yourself to your list. Give to yourself this holiday season-just don't buy anything in the process. Instead of making an impulse buy on a sweater or new smartphone, commit a certain amount of your money to a savings account, based on what you'll spend. If your holiday gift budget is $500 this year, challenge yourself to seek out the good deals, stick to your list-and save just $75 of it in an interest-bearing online savings account. Keep the good habit up, and you'll have cash ready and waiting for your holiday shopping next year.
No positions in stocks mentioned.
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