Around this time last year, cybercrime went mainstream with Target's announcement that the credit and debit card accounts of 40 million shoppers were nabbed during the height of the holiday shopping season. Worse, the personally identifiable information of 70 million Target (TGT) customers was in the wind. Before you get too worked up, here's something to remember: Breaches are and will always be the enemy, but the more likely source of financial woe this holiday season looks back at you in the mirror every day.
Getting consumers and enterprises up to speed in the realm of data security continues to be a work in progress. Most people know not to click on any old link that hits their inbox and they are familiar with the basics of how to protect themselves from cybercriminals (whether or not they actually put them in practice).
However, while all of us are at risk of becoming a victim of identity theft this holiday shopping season, there's an even bigger problem. It not only pre-dates the digital era, it was around long before credit cards: It's spending more than you can afford. But don't break that mirror. Seven years of bad luck will seem like a great deal compared to the seven years of tough luck you will experience if you don't manage your credit intelligently.
It's common sense. If you overdo it this holiday season, the credit you use will become the gift that keeps on taking. And it's not just interest charges that will be a drain on your budget -- it's the long-term credit implications.
How Overspending Can Hurt Your Credit
Debt usage is the second biggest factor in your credit score, accounting for about 30 percent of it. Your score considers your amount of debt, including the amount you owe on installment loans, as well as your credit utilization -- how much of your available credit on revolving accounts (like credit cards) you're using. The less you use of your credit lines, the better.
With Black Friday and Cyber Monday rapidly approaching, you may be looking for a way to stretch your buying power. While it may seem counter-intuitive, increasing your available credit with a new card (but not just any card) may actually improve your standing with the credit reporting agencies. But you have to be smart about it.
When you open a new credit card, you can increase your available credit, and thus can raise your credit scores. But if you max out that card when you open it, and carry that balance long past the holidays, it defeats the purpose. A good rule of thumb is to keep your total credit utilization of your credit card accounts under the 10 percent mark.
While a new credit card can help make ends meet and facilitate big purchases that would otherwise be out of reach (or a lot of smaller ones for the holidays), it only works when managed correctly.
The first consideration is financial feasibility -- something you know better than even the credit bureaus Equifax, Experian and TransUnion -- and there should not be a sliding rule when it comes time to do your holiday shopping. If you carry a balance on your debts, you should be able to make more than the minimum payment every month. Ideally, you should charge no more than what you can pay in full.
When thinking about how much credit you should have and how much you should use, it can be helpful to think of the various forms of credit as an array of wealth-building tools, kind of like stocks and bonds in an investment portfolio. Your credit portfolio, as it were, has a few moving parts that are used to figure out how much credit you can handle without finding yourself underwater.
The Credit Score Implications
Will a new credit card offer at the checkout counter help your credit score? Not always. (However, you can use Credit.com's free credit score tools to see your credit scores and get a breakdown of how your credit behavior is affecting your scores. Also be sure to pull your full free credit reports at least once a year from AnnualCreditReport.com.) If you have not shopped for a new credit card in a while, a new account will increase your available credit, and if you pay off the balance on that account every month or keep it under the 10 percent mark, your score should increase with this addition to your credit portfolio, which will, in the long run, make you a stronger candidate for bigger loans down the line.
If you handle your credit well, it can be the gift that keeps on giving. Get it wrong and your financial life will make the Grinch smile ear-to-ear.
16 Black Friday Myths Busted
The Holiday Shopping Danger You Won't See Coming
There's no stopping the holiday creep, and this year we expect the majority of Black Friday sales to commence on Thanksgiving Day, and some of the best deals might even sell out before Friday. Since there are only 26 days (three full weekends) between Black Friday and Christmas, we expect some Black Friday sales as early as two weeks before the namesake day.
While doorbusters are advertised in advance to bring shoppers in-store, over the years the competition between retailers has become so fierce that these hot deals have increasingly also made their way online. Data from previous years has shown that up to 70 percent of in-store Black Friday deals were also available online for the same price -- or less! Because Amazon (AMZN) and other sites will price-match even the hottest in-store offers from brick-and-mortar retailers like Best Buy (BBY), Target (TGT) and Walmart (WMT) many feel pressure to release deals online as well.
Watch the evening news and you'll see plenty of Black Friday mobs, fights, and brawls. Fortunately, most holiday shoppers will never witness such events. Sure, there will always be reports of overly-aggressive shoppers on Black Friday, but a majority of consumers express feeling a sense of camaraderie while waiting in line predawn. Plus, no store wants instances of violence associated with their name in the news, so they will do everything in their power to keep things orderly (including beefing up their staff).
Black Friday is the best time of the year to go on a shopping spree, but not every sale you encounter will merit its best-of-the-year branding. Some general categories see better prices later (like winter apparel, which will drop significantly in price come January), while there will always be average prices nestled in among those doorbuster deals. To save during Black Friday, know what you want, be flexible if you can, and don't bite if the price doesn't seem right.
Everyone loves a secret sale, so on Thanksgiving Day retailers will release additional Black Friday deals that weren't in their earlier circulars. Moreover, some retailers will respond to competitor pricing and make last-minute price cuts to compete.
Once upon a time, Black Friday ad leaks were actual scans of ads that were questionably posted online for shoppers to analyze in advance of the big day. Now, stores wield their ads strategically, releasing sneak peeks for rewards members or previewing the ads for select media, all to control the flow of information to their greatest benefit.
Black Friday is a blockbuster event for low-end goods from stores and manufacturers you may not be familiar with. However, in recent years several retailers of high-end clothing and other items have broken the age-old trend of skipping Black Friday promotions. But rather than offer promotions from their main brands, luxury retailers have let their outlets do the dirty work. Stores like Last Call by Neiman Marcus, Barney's Warehouse, and Saks Fifth Avenue Off 5th are a few outlets you can expect to participate in Black Friday sales.
Stores tend to tighten their return policies during the holidays, making it hard for consumers to return items. Some retailers will go so far as only offering store credit on returns, even if you have a receipt. A handful of stores are also tracking serial returners and banning them. And if you don't remember to ask for a gift receipt, your recipients might be doubly unhappy: they'll likely receive a store credit for only a portion of the purchase price.
While a number of online retailers advertise week-long Cyber Monday sales, the best deals appear on Sunday and Monday only, with some holding over to Tuesday. Just as we saw with Black Friday, many of the best Cyber Monday deals have crept into the preceding day, in this case Sunday. Last year, for instance, we posted four times more Editors' Choice deals on Sunday and Cyber Monday combined than we did for the remainder of Cyber Week.
Unfortunately, submitting an online order -- even after entering payment information -- doesn't guarantee that the items you purchased will be yours. Retailers occasionally display inaccurate inventory and will sometimes let consumers buy an item that is out of stock; this is a particular problem on Black Friday, given the speed of transactions. Moreover, a store may decide to cancel all orders for items at mistakenly low prices. Best Buy notoriously did this in 2011 when it mistakenly offered a $100 iTunes gift card for $60; the store then canceled all orders and asked customers to instead purchase the deal for the intended price of $80.
Unfortunately, the only guaranteed way to safeguard your personal information this holiday season is by paying with cash. However, we understand not everyone can reasonably do this. So the best way to avoid data hacks this holiday season is by taking multiple precautionary measures when shopping online. Pay with credit rather than debit, update your passwords and watch billing statements to ensure your card hasn't been used by thieves elsewhere. Should a security breach occur, immediately contact your bank and report your losses.
Bargain bin devices have a reputation for being bottom-of-the-barrel items that nobody wants, be it movies, laptops or apparel. However, this past year budget products have been showing more flair than usual. That's because some of these items, such as entry-level 42-inch HDTVs and ultra-cheap laptops, simply cannot get any cheaper. So to make them more appealing, retailers have given them more panache. For laptops, that means you'll find budget machines with better-than-average specs. In the case of TVs, it means finding budget 42-inch sets from name-brand manufacturers, instead of just off-brand models. Ultimately, it's a win for shoppers because you get more value for your dollar.