Majority opt for a debt free holiday season

According to the National Foundation for Credit Counseling (NFCC) October online poll, the overwhelming majority of consumers intend to pay for their holiday expenses with cash or a debit card. Seventy percent of more than 4,800 respondents chose this option over charging the expense or utilizing a lay-away plan.

Consumers are definitely shifting toward using debit cards, perhaps as a tool to control spending, or because they have limited or no access to credit.  Regardless of the reason, it will definitely be a nice gift to begin 2011 with no holiday debt.

Every financial decision should be an educated one. The NFCC suggests that consumers consider the following choices, the same that were given to the poll respondents, when determining how to pay for their own holiday expenses.

  • Paying with cash or using a debit card for purchases – This is a smart choice for many. However, consumers need to be aware that purchases charged to a credit card come with certain protections that aren’t available when using a debit card. For instance, according to the Federal Credit Billing Act, you can contest a credit card charge for a product you purchased, but never arrived. Of course you’ll need to notify the merchant and the issuer of the problem, and take reasonable steps to prove your claim, but the law is on your side. If you paid with a debit card and have a problem, you may ultimately get your money back, but it will be much more trouble and take longer than if a credit card had been used. Tip: Some credit cards provide protections, too. Before hitting the malls this holiday season, consumers would be well-served to call their credit card issuer and inquire about the protections that come with their card.
  • Charging purchases and paying the bill in full when it arrives – This is one of the best financial moves a consumer can make. You get to buy now and pay later, build a positive credit history which results in a high credit score, and never pay a cent of interest. You can take advantage of sale items, don’t have to carry large amounts of cash, and have all the conveniences of using credit. Tip: Keep track of your spending during the holidays so that -more- you can pay the bill when it arrives. Do this by recording all charges into your check register just as though you were paying for them on the spot. That way you won’t be spending money you don’t actually have.
  • Charging purchases and paying for them over time – Consumers who do this are on a slippery financial slope. As well-meaning as a person may be, spending can get out of hand, particularly during the holidays. As a matter of fact, many are still paying for holiday 2009 purchases when they begin charging 2010 items. Adding new debt to old is never smart, and with double-digit interest rates, debt can become unmanageable seemingly overnight. Tip: Commit to controlling your spending during the holidays, and find someone to hold you accountable to that commitment. You owe it to yourself and your family to set the example of responsible financial behavior.
  • Utilizing layaway programs – Everything old is new again, as layaway programs are now back and gaining in popularity. Layaway plans allow consumers to make purchases by putting down a deposit which may represent a percentage of the purchase price, and then making installment payments over a period of time until the item is paid for in full. It is not until that time that the consumer takes possession of the item. Layaway is a great tool, particularly for those without access to credit. Tip: Consumers should fully understand the terms of the layaway plan before signing up for it, as there may be a cancellation or restocking fee assessed if payments are missed or if you change your mind about the purchase. Also inquire if you can take advantage of a sale if the item you put in layaway is offered for a cheaper price after you’re already in the program.

It is encouraging to see that the fewest number of respondents, only nine percent, intend to charge their purchases and pay for them over time. This signals that consumers more fully understand the potential negative consequences resulting from this decision, and are opting for smarter ways to pay for their holiday expenses.

The actual October NFCC online survey questions and results are as follows:

I intend to pay for my holiday spending by:

A. Paying cash or using a debit card for my purchases = 70%

B. Charging my purchases, and paying the bill in full when it arrives = 10%

C. Charging my purchases, and paying for them over time = 9%

D. Utilizing layaway programs = 11%

Note: The NFCC’s October Financial Literacy Opinion Index was conducted via the homepage of the NFCC Web site ( from October 1-31, 2010 and answered by 4,814 individuals.

Kim McGrigg is the former Manager of Community and Media Relations for MMI.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.