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7 costly mistakes back-to-school shoppers make

Prime spending season is just getting started, and missteps now could take a long time to correct. Here are the common ones -- and how to avoid them.

By Credit.com Aug 8, 2013 12:18PM

This post comes from Adam Levin at partner site Credit.com.


Credit.com logoIf you have kids in school -- kindergarten through college -- you don’t need anyone to remind you that back-to-school season has arrived.

A green chalkboard with the alphabet written on it © Ocean/Corbis /CorbisBetween those early-season sales and last-minute shopping, there’s plenty of potential for trouble in the realm of personal finance -- all the more so if you’re buying school supplies or clothes on a tight or non-existent budget.

After you survive this ritual, there is 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 huge mistake to wade into the back-to-school shark tank if you haven’t set 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 are getting what they want (especially if the choice is between Man of Steel, Iron Man, Spider-Man, 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 crowds at Staples, Kmart or Target, or navigating several online retailers, while fending off cries of, “Mommy, I really NEED to have this” and falling into the trap of running a “dollars for peace” program. Democracy is a wonderful thing, but not 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?”

Even if you can’t afford to use cash, want to preserve it or want the rewards points, you should act as if you can. 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. Sometimes, in order to exercise the most self-discipline (and avoid acquisition ecstasy), go the cash route. Withdraw the exact amount you have budgeted and when you’re out of cash, you’re done shopping.
4. Picking the wrong rewards deal
Even if you have plenty of available credit, it’s still possible to make credit card mistakes while doing your back-to-school shopping. If you fail to take advantage of the best rewards deal, you’re not taking full advantage of your credit portfolio. And why shouldn’t you?

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 actually needs.

5. Jumping at store credit cards
When you’re standing at the cash register and the cashier offers 5% or 10% off a big purchase if you get their retail credit card, the offer may sound tempting. In many cases, however, it’s best to resist. While upfront savings are nice, most store cards come with higher interest rates than you would pay if you made those purchases with a general purpose credit card. So before you apply, consider whether or not you’ll be carrying a balance, and if the answer is yes, proceed with extreme caution, because any discount you get at the register is likely to be wiped out by the interest rates you pay on the balance, not to mention late fees if you happen to forget that you have a new bill to pay.

Also, be wary of taking these deals at multiple stores. If you have too many credit inquiries on your credit report, your credit score could suffer, which could result in higher interest rates on future loans.

6. Taking out a payday loan
Payday loans come with average annual interest rates topping 400%, according to the Center for Responsible Lending. With so many other forms of credit available, there are very few occasions when taking out such a loan could possibly make sense. These may include the threat of getting evicted from your home, or a guy named Vinnie threatening to break your fingers.

Otherwise, most people find payday loans to be exorbitantly expensive. 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 interest charges of more than 400%, which will likely place you deeper into a financial hole.

7. Shopping when hungry, tired or rushed
Because back-to-school shopping has the aura of necessity, it’s easy to make impulsive purchases. That’s especially true when you walk into the store fatigued, starving, or at 11 p.m. the night before the first day of school. In addition to paying too much money, your distracted brain might cause you to make poor credit decisions, and end up throwing everything on a higher-interest credit card because you are 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.

More from Credit.com:
14Comments
Aug 16, 2013 1:10PM
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this sounds like spending traps of any kind, not just shcool shopping.  How many times can the same inane "suggestions" be re-packaged as "new" advice??

 

Aug 16, 2013 12:52PM
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It's not unlike Christmas shopping...do it throughout the summer and you don't have to worry about the "big hit" on your budget...
Aug 16, 2013 2:28PM
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Why do you need to get the same things year after year.  I always put my children's'  things aside as they finished the school year, thereby buying very few new items as the new year started.  Clothes were bought as and when needed, not on one day or in one week.  Got better deals and wasted little time and money.
Aug 16, 2013 3:29PM
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I purchase school clothes at thrift stores, and SAVE  I have gotten New with tags still on for less than $5 and tee shirts for only 99cents.  got new or almost new back  packs the kids picked out for less than $5.
Aug 16, 2013 3:58PM
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I want to say one thing:
Toys R Us has some of the best deal for Back-to-school. I bought a backpack for $13, good quality, for my son and it came with a free lunchbox on tax-free weekend. I highly suggest that you buy from there during back-to-school seasons. You can find buy one, get one free deals on crayons, pencils, and numerous other items.
Aug 16, 2013 3:49PM
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This is ridiculous.  I'm strapped for cash myself but I've never had to use a credit card or taken a payday loan to pay for my son's school supplies.  The best thing to do is get a list of the supplies you need from the school and stick to that list.  If you need to buy your kid a bookbag or lunchbox, get a quality one that would last several years.  A $40 LL Bean bookbag will get a kid through at LEAST 3 school years(more likely 5)--much better than buying a cheapo $15-20 every single year.  Not every single kid needs a brand new iPad for school either.  Schools often rent or loan out iPads for much cheaper than purchasing one.

 

I buy my son's clothes as the year goes along rather than all at once right before school starts too.  That's another great way to keep you from being strapped for cash all at once!

Aug 16, 2013 1:46PM
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This sotry has been going around now under diff. tag lines for a few days....  Come up with something new....PLEASE!!!!!

 

 

 

 

 

 

 

 

 

 

 

 

Aug 25, 2013 7:48PM
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This is why I'm so glad I decided on Catholic School where they wear uniforms for my son. Makes it all so much easier.
Aug 25, 2013 12:17PM
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The average American owes about $4,800.00 in credit cards which is about 1.5 trillion dollars total for Americans and we are concerned about how much our government owes?  That is besides what is owed on homes across the U.S.    How about spending less for junior and pay off that credit card?    You can never be anything but a slave until you are financially independent.  Did I forget the house debt,  car payments and student loans?    What you will see is that Americans personally are in debt about double the amount the government is in debt.   Any bad downturn in the economy and millions would be out in the street.   Banks would collasp so fast that no way could the government step in to stop them from failing.  Get yourself our of debt first and then worry about what junior is going to wear to school. 
Aug 16, 2013 3:54PM
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Dear MSN,

Learn how to write a better article.
This is common sense now.
Aug 16, 2013 2:34PM
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Hello?  Author?  It seems like the lights are on but nobody's home....in this economy, why would you make the broad assumption that everyone has a variety of credit cards to chose from?  Or any cards left at all for that matter?  My hubby lost his job six months ago and i can't afford more than two tee shirts and a pair of jeans for my child this year. Our home is in forclosure, i just got my car back from the repo man, and my power will likely be shut of next week because they won't grant me an extension.  Needless to say my credit cards have been shut off and my creditors are now suing me.  I'm glad some people are not being affected by this lack-luster economy but I think there are a lot of people barely getting by.  Try writing about new and novel ways to save money for your family.
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