Wise Holiday Shopping: Deals Just A Start

Everyone likes getting big discounts, especially when shopping for the holidays. That becomes even more important in a tight economy. And in this column, Early Show financial contributor Ray Martin points out that the price front is only one area where you can -- and need to -- do well.

As consumers confront the dismal news about the economy, rising job losses and the financial market crisis, one thing is clear: Folks are still shopping for the holidays. Even with consumer sentiment falling, sales at the beginning of the holiday shopping season were higher than the previous year. But along with the higher sales are higher levels of anxiety for shoppers.

Fortunately for consumers, retailers seem to be offering more sales and discounts in the stores earlier this season. Many are very worried and are offering earlier and steeper incentives to get shoppers in the spending mood.

In these anxious and uncertain times, it's more important than ever to be a smart shopper. So here's a list of the top questions and concerns on the minds of holiday shoppers this season:

Gift Card Do's and Don'ts

It used to be that the biggest things you had to worry about when giving gift cards were the fees and charges. Now, with the financial crisis affecting so many retailers, a growing number of them are heading from trouble or even bankruptcy, and avoiding gift cards issued by retailers who go out of business is on the minds of many shoppers.

It is estimated that bankruptcies could cause consumers to lose about $100 million this year on gift cards.

So, what happens if you buy a gift card from a major retailer who later files for bankruptcy before you use it?

When Tweeter, the electronics store chain, filed for bankruptcy last month, the court granted permission to continue to redeem gift cards for five days following the bankruptcy filing. If you were unable to redeem your gift card by that date, the only option left is to file a claim with the Bankruptcy Court for the unused portion of your gift card. Maybe you'll get a small settlement, if anything at all.

Even though Circuit City filed for bankruptcy reorganization (which means that they plan to restructure the business and come out of bankruptcy eventually), they are still accepting and issuing new gift cards. The advice here is to use your Circuit City gift card soon and not buy a new Circuit City gift card at this time.

When Linens 'n Things initially filed for bankruptcy and finally shut its doors in October, it was accepting gift cards during liquidation, so it allowed gift card holders a last opportunity to use their Linens and Things gift card.

And the list goes on: Sharper Image, Bennigan's, and Steak and Ale Restaurants, Value City Department Store, Mervyn's Department Store, Steve & Barry's, and Boscov's Department Store have all declared bankruptcy this year.

The bottom line: If you are still holding onto gift cards received in the past, now is the time to use them. Buy gift cards for things the person you give them to will use them for immediately. Also, be careful to only buy gift cards that don't have the security number exposed, or are held in a safe location behind the counter: Thieves can write down gift card numbers and monitor your card online, quickly accessing the card when activated and draining its value by making their purchases before the gift card owner is aware of it.

Finally, check into the gift card fees before you buy. They are typically posted on the gift card sleeve or on the associated Web site. Buy gift cards with no issuance fees, expiration dates or maintenance fees, which can easily be found with gift cards issued directly by retailers. And if you receive a gift card, use it promptly, not only to avoid possible maintenance fees and expiration, but also to take advantage of post-holiday discounts.

Getting Promotions and Coupons for Extra Savings

Power shoppers use this trick to save money: When you are at the point of checkout on the retailer's Web site and you are prompted to enter a coupon or promotional code, it is a signal that there is a special discount available for the product. Before you click "buy," open another browser and search Google by entering the phrase used by the merchant (such as "promotional code") and the name of the merchant - doing this will quickly lead you the codes you need to save you money.

Also, log onto Web sites such as couponcabin.com and fatwallet.com to look up promotion and coupon codes for many retailers and their products - using these codes can qualify you for additional discounts or free shipping on your purchases.

Extended Warranty Tips

Generally, extended warranties and service contracts are not worth buying. According to Consumers Union, fewer that 20 percent of products covered by extended warranties are ever brought in for repair. On personal electronics, most defects are apparent within the first 90 days, while the original warranty is still in effect. The best thing is to do your research and buy only products with good repair and service histories, especially when it comes to electronics, computers and home appliances.

Another way to get extended warranty protection is to pay for the item with a credit card that has extended warranties as a cardholder benefit. Many credit cards extend the manufacturers warranty up to a maximum of one year. To find out if your credit card offers this, read the credit card agreement and understand the steps you need to take to make a claim under its extended warranty.

When to Use Debit or Credit

When doing your holiday shopping, strongly consider using a credit card, especially for purchases made online. There are several very compelling reasons for this.

First, only credit cards provide consumer protections under the Fair Credit Billing Act. Under this law, your liability for fraudulent or disputed charges on credit cards is limited to $50, and you have the right to dispute charges and withhold payment while the charge is investigated. Also, if the merchandise delivered is defective or not in the condition "as agreed," you have the right send it back to the merchant and deny the payment - try getting your money back from a difficult merchant after you've paid by a check!

Also, even though some banks advertise that their debit cards provide comparable protection, they are not required under the law to do so. Your liability for fraudulent charges on a debit card can be as high as all the money in your account and your credit line, depending on when you report the fraudulent or disputed charge.

Finally, many credit cards also provide benefits such as requiring merchants to exchange or replace defective or damaged merchandise, protection against no-return policies, and extension of manufacturers warranties; this is particularly valuable when buying and shipping fragile gifts (such as digital cameras or DVD players) to your family across the country.

Giving Gifts and Donations

With the difficult economy affecting so many people, folks are feeling the need to do what they can to help out in their communities. But in making cash donations, it's also wise to think about what's required to get a tax deduction to help lessen the financial cost of the gift.

When making cash donations, keep in mind that:

To qualify for a charitable donation deduction on your taxes, you now must have a written statement from the charity showing the date and amount of the contribution and the name of the charity. Another form of acceptable proof is a bank or credit card statement showing the amount of the gift. It used to be that such proof was only required for gifts of $250 or more. The bottom line: Without a receipt to prove your cash donation, your reward will be in heaven but not on your tax return.

Also, as a general rule, folks who donate shares of stock or a mutual fund that they have owned for more than a year can claim a charitable gift deduction of the market value of stock or mutual fund shares donated to charity. And here's the best part: Neither you nor the charity will pay taxes on the gain when the charity sells the shares. Essentially, you are giving away the tax liability on the investment gains and getting a tax deduction for the gift! But don't make the mistake of giving away stock that you have owned for less than a year or is worth less than you paid for it. You can only deduct current market value of the shares and cannot take a deduction for the loss.
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