Tips for Holiday Shopping with Less-than-perfect Credit

Manage Your Credit The holiday season is at its peak in December — during which time people celebrate numerous holidays including Christmas, Hanukkah and Kwanzaa. Many of these celebrations involve the tradition of gift giving. However, a low credit score may hinder your holiday shopping efforts.

If you have a low credit score, there are still ways you can buy that perfect gift. Check out the holiday shopping tips below to find out how.

Create a cash-based budget

Although it is easy to rely on credit cards and other forms of financing during the holiday season, you can use cash instead.

In fact, the majority of holiday shoppers do not use credit when buying gifts. According to National Retail Federation, 71.2 percent of survey respondents stated they would buy holiday gifts this year using cash, checks or debit cards — instead of credit cards.

By saving throughout the year or trimming some personal spending as the end of the year approaches, you can create a holiday spending budget. By staying within this budget, you can buys gifts for your entire list without worrying about a low credit score.

Get a Secured Credit Card or Pre-paid Credit Card

With the ease of doing your holiday shopping online, you may need a credit card to complete your transactions. Although most vendors accept debit cards, you may be leery entering information related to your bank account to pay for the purchase.

To better protect your private banking information, you can purchase a pre-paid credit card or apply for a secured credit card. Because these cards require a payment/deposit to activate, your low credit score should not be a factor. When applying for a secured credit card, be sure to understand the limits and fees associated with the card before you use it.

Because prepaid cards and secured cards have specific set limits, you will still need to properly budget when using these credit cards.

Be Diligent about Comparison Shopping

It doesn't matter if you are using cash, a secured card, or another credit card to buy holiday gifts, an important holiday shopping tip is to research the gifts you are buying.

Through its website, the Federal Trade Commission offers the following holiday shopping advice to find the best deals:

  • Use search engines to learn more about products, including the possibility of scams;
  • Read third-party online reviews for the product;
  • Check shopping comparison websites to find the best price (be sure to consider shipping if buying online);
  • Look for valid coupons (or coupon codes online) and discounts;
  • Know the return policies for the stores you use;
  • When purchasing online, be sure the website uses a secure checkout (the web address needs to start with https).

Buy Gifts on Layaway When Possible

Layaway is a great way to buy holiday gifts when you have less-than-perfect credit. Because there is no credit check, a low credit score will not hinder your holiday shopping efforts. Layaway allows you to pay a deposit on an item and know that the item will not be sold to another customer while you make payments.

Most layaway plans have minimal fees, if any, making it more affordable than carrying a balance on a credit card. This is especially true if you have a low credit score — which typically means you will have higher interest rates on your credit cards.

Once credit cards became an acceptable form of payment, the option for placing an item on layaway began to disappear. However, in recent years customers have requested layaway options and several retailers have reinstated their layaway programs.

Cautiously Consider "Buy Now Pay Later" Offers

You may be lured by commercials that tout offers to buy a product now, but not pay until later. Many deals include terms like "same as cash" or "no interest for a year." However, these financing offers come with a catch.

If you are not aware of all of the stipulations, you may find yourself paying excessive fees and interest at the end of the contract.

Also, many of these offers have the fine print "with approved credit." If you have a low credit score, these deferred interest loans may not be available to you — or if they are, they have additional fees and higher interest rates after the grace period.

There are also some deferred payment companies that extend this financing specifically to people with lower credit scores and a less-than-perfect credit history. These companies offer these options, knowing there is a good chance that the amount will not be paid off during the grace period and then will charge higher interest rates.

Be cautious when applying for these types of deferred payment plans. You may find yourself with higher-than-expected payments.

Remember, It's the Thought that Counts

During the holiday season, it is easy to get carried away with the amount you spend on gift giving. However, in these economic times, many people have seen their credit scores drop and may have more trouble getting financing for holiday shopping.

When you are searching for that perfect holiday gift, remember, you don't have to spend a lot of money to make an impression. Instead of looking for gifts that are all about the flash, try to find gifts that have a real meaning. Yes, you will have to spend money on many of these gifts, but if you try, you can find personal gifts at affordable prices.

If you are unsure whether or not you have a low credit score, be sure to check your credit score sooner rather than later.


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