Aug. 14, 2013 at 1:55 PM ET
Yes, it’s time for back-to-school shopping again. If you’re on a tight or non-existent budget that can be a real challenge.
And after you survive this ritual, there’s a veritable conga line of holidays—Halloween, Thanksgiving, Christmas, Hanukkah, Kwanzaa, New Year’s, etc.—each jumping up and down, screaming “What about me?!” and presenting financial challenges if you’re not exactly flush.
A little planning now could make a big difference in what you can spend as 2014 draws nearer. With that in mind, here are seven mistakes you should avoid when doing your back-to-school shopping.
#1: Failing to Establish a Budget Before You Start
If cash flow is an issue, it’s a big mistake to wade into the back-to-school shark tank without a budget. Stream of consciousness shopping can only get you into trouble. Figure out what you can afford to spend, make a comprehensive list, even consult with your children to make sure you’re getting what they want (especially if the choice is between Man of Steel, Iron Man, Spiderman, Dora or Barbie backpacks and notebooks) in the context of what they need.
Unless it is absolutely necessary (or a family bonding exercise) to have them with you, it’s best to leave the munchkins at home. If you want to know their preferences, browse with them online before hitting the stores. The last thing you need is to be weaving through the aisles while dealing with cries of, “Mommy, I really NEED to have this!” Democracy is a wonderful thing, except when it involves back-to-school shopping.
#2: Using the Wrong Credit Card
The average American borrower owes $4,878 among 3.5 different credit cards. If you’re one of the millions of Americans who runs a balance on your cards and can’t pay it off at the end of each month, choosing the right card is essential. If your goal is to preserve your cash flow, concentrate on reducing debt on credit cards with the highest rates first.
Of course, you may have to weigh this concern against using a lower-interest card that is nearing its credit limit. If you have a choice, it’s always best to use the card with the lowest rate when you know you’re going to have to carry a balance. If you forget the exact terms of each of your cards, check the fine print before leaving home.
#3: Using Credit When You Should Pay Cash
If you find yourself checking rates and choosing between different cards to avoid bumping up against your credit limit, ask yourself this: “Can I pay with cash?”
The goal is to shop wisely. Spend as little as possible, and remember: if you’re running low on affordable credit, the last thing you should do is rack up more debt.
If you use a debit card, decide how much you can spend before you leave home. In order to exercise the most self-discipline and avoid the ecstasy of acquisition, you should use cash. Withdraw the exact amount you’ve budgeted and when you’re out of cash, you’re done shopping.
#4: Picking the Wrong Rewards Deal
Fail to take advantage of the best rewards deal and you’re cheating yourself.
Many credit cards offer quarterly rewards deals for specific types of purchases. However, those deals don’t just magically appear.
“You have to pay attention and sign up beforehand, at the beginning of the quarter,” says Gerri Detweiler, Credit.com’s personal finance expert. “It’s a good deal, though, because you often can save about 10% on your purchases.
A typical back-to-school rewards program will focus savings on office supplies or kids’ clothing. Many of the best deals are available online at a “rewards mall” website offered by your credit card issuer. You should shop around beforehand, especially if you have more than one card, to find the best deals on the things your child reaally needs.
#5: Jumping at Store Credit Cards
It’s a tempting offer: you’re standing at the cash register and the cashier offers 5 or 10 percent discount on a big purchase if you get their retail credit card. In many cases, however, it’s best to resist.
While upfront savings are nice, most store cards come with higher interest rates than a general purpose credit card. Carry a balance on that card and the interest you pay on that purchase is likely to wipe out any discount you get at the register.
One of these deals might be OK, but apply for new cards at several different retailers and you’re asking for trouble. Those extra credit inquiries on your credit report could hurt your credit score and that could result in higher interest rates on future loans.
If you’re not sure how many credit inquiries are on your report, check out Credit.com’s free Credit Report Card. It will show you that information, your credit scores and break down the information in your credit report in an easy to understand way.
#6: Taking out a Payday Loan
Payday loans come with average annual interest rates topping 400 percent, according to the Center for Responsible Lending. With so many other forms of credit available, these exorbitantly expensive loans rarely make sense.
No matter how cool the backpack or how stylish the new pair of sneakers, your child’s need for school supplies simply do not justify sky high interest rates which will probably put you deeper into a financial hole. Consider shopping around for a personal loan as an alternative.
#7: Shopping When Hungry, Tired or Rushed
Because back-to-school shopping has the aura of necessity, it’s easy to make impulsive purchases. In addition to paying too much money, your distracted brain might cause you to make poor credit decisions, such as putting everything on a higher interest credit card because you’re too tired to care.
While this last point may not seem like personal finance advice, it is. Eat something before you shop. Take a nap if you can. Go early. By taking all the above common-sense steps to guard your finances and avoid credit mistakes, your child’s schooling on important financial matters will start long before the buses start rolling again.
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