It’s exciting news, but it remains to be seen if consumers kept up these good habits on Black Friday. US retail sales hit $11.4 billion to kick off the holiday shopping season, which is exciting for retailers—but not exciting if it means people are spending beyond their means.

A recent study by the Western Union Co. shows the number one consumer worry this holiday season is overspending. To prevent holiday-induced debt, create a budget before you hit the mall (or click your mouse) and stick to it. Going cold turkey on using credit cards for the holiday season is another smart move to avoid debt.

Can’t break the credit card habit? Counting on only making the minimum payment each month on a holiday credit card bill? Think again. Only paying the minimum will cost you more in the long run. For instance, if you rack up a $3,000 shopping bill on a credit card with an 18 percent interest rate, it will take 10 years to pay it off if you’re just making the minimum payment. That includes $1,700 in extra interest payments!

Instead of racking up debt this holiday season make a list- check it twice, budget wisely, and when you find that perfect present for Mom or Uncle Mike, be nice to your budget and resist the urge to splurge on “just one more” for yourself. Check out this BetterBudgeting.com article for 63 great gift ideas under $10!

AmericanExpress.com

In the good ol’ days, a gold or platinum credit card signaled that you had arrived. It meant lenders considered you a good credit risk with significant spending and a sterling payment history. With that came perks, most often a higher credit limit and cash back on purchases as a concession for a bank’s best customers (and typically accompanied by an annual fee).

However, these days even recent college graduates are carrying around prestige cards. (I’m one of them: I got my first platinum plastic when I was 23 with just five years of credit history to my name.)

The average American has four credit cards with an average balance of $15,799 among those with credit-card debt. (Only 25 percent of Americans do not have any credit cards, and 30 percent of Americans pay off their balances every month.)

There are still perks-paying cards for those who actually avail themselves of such services. Take the American Express Centurion, a.k.a. the “Black Card,” which remains invitation-only. Just to qualify, a consumer has to charge six figures on an American Express account annually (exactly how much, the company will not disclose). And once your application is accepted, you can expect to pay a whopping $2,500 annual fee in addition to a one-time $5,000 initiation fee. In return, customers receive top frequent-flyer status on several airlines, free nights at the world’s most exclusive hotels, personal shoppers at stores like Gucci and Neiman Marcus, and 24/7 international concierge services.

Still, smart consumers are more interested in talking turkey: What’s the annual fee? What’s the interest rate? And are those perks worth the money?

Zimbio.com

Pretend your brother has come to you with a problem: His credit score is shot, but he wants to buy a new car. He is asking you not for money but to cosign an auto loan for him of $20,000. You have a flawless credit report and you agree, but less than a year later, he defaults.

What does the lender do?

A.) The collections department exhausts every avenue of getting your brother to make good on his payments before approaching you for help.

B.) The collections department comes after you for the full amount of the debt, since you’re the one with the great credit history and probably the money to back it up.

See the answer after the jump.

The answer is B. When you cosign a loan, you’re agreeing to be on the hook for the entire debt. And unfortunately, the track record for borrowers is not great in the current economy.

The default rate on credit-card loans is currently 5.91 percent, with auto loan defaults hovering around 1.45 percent, according to the most recent S&P/Experian Credit Default Indices. Primary mortgage holders go into default at a rate of 2.16 percent, and second mortgages founder 1.51 percent of the time.

As financial columnist Megan McArdle wrote this week, “If you think that they really need the money, and that you’re not just helping someone dig themselves even deeper into financial irresponsibility, then my advice is to just give them the money.” And if you can’t afford to do that, then decline your loved one’s request to cosign — because a co-signature means taking on a risk you’d eventually be doing exactly that.

According to the scientists who developed it, “The model was broken down using six immediately identifiable factors; weather (W), debt (d), time since Christmas (T), time since failing our new year’s resolutions (Q), low motivational levels (M) and the feeling of a need to take action (Na).” The result is the Monday of the last full week of January, which falls on January 24 this year.

I thought it was interesting that debt and busted New Year’s resolutions both factor prominently in Blue Monday, since they are both finance-related and typically things under our control. (Can’t do much about the weather, unfortunately.) So here are a few ideas to ward off the money blues and keep your finances in the black:

• Return some Christmas gifts. If you and your significant other went overboard on presents last months, discuss returning one of the more pricy gifts that might have been a stretch to afford. You’ll lose the regret and free up some money instantly.
• Get cash for used stuff. Alternatively, consider selling something you received for Christmas 2009 that has lost some of its luster over the past year — eBay and Craigslist are hopping in January, and you can always sell things like books, video games, and CDs on Half.com. Then turn around and put your newfound cash toward your credit card balance.
• Files your taxes early. Once you have all your tax forms, get to work on your federal tax return. The sooner you file, the sooner you can get your tax refund into your pocket. And the sooner you can adjust your withholding so you can stop giving the government a free loan of your rightful money.

McCullagh.org

According to a recent poll by Consumer Reports, a whopping 13.6 million Americans are still paying off the debt they incurred from last year’s holiday shopping. To keep yourself out of that demographic, here are five tips to help you save money at the last minute and avoid making payments for months or years after playing Santa.

1. Pay attention to price-adjustment policies. Already finished your holiday shopping? It’s still smart to keep an eye on Christmas Eve sales. Many stores offer a one-time price adjustment within a set period of time after purchasing, so if that espresso maker you bought at full price is now half-off, you may be able to negotiate a refund of the difference just by bringing in your receipt.
2. Check in with your holiday budget periodically. That same Consumer Reports survey found that 39 percent of people who made a holiday shopping budget last year ended up blowing it by an average of 16 percent, or $112. If you’ve made a budget this year, check in with it before hitting the down-to-the-wire doorbusters. If you can’t swing it, steer clear of the temptation.
3. Avoid shopping for yourself. With so many sales flying about, it’s tempting to indulge in a “one for you, one for me” policy while out holiday shopping. (Diehard shopaholics know exactly what I’m talking about.) But it’s a surefire way to overspend without intending to. Those cute boots will still be around after Christmas Day, so put off shopping for yourself until after the holidays or when your budget allows. Patience could even pay off, between gift money you may receive and year-end blowout sales to bring the cost down.
4. Don’t get competitive. Many people feel pressure to spend the same amount on gifts they give as the gifts they’ve received. But Christmas isn’t about one-upping your loved ones. If your budget is tighter than your brother’s, don’t feel you have to match his gift dollar for dollar. Put extra thought, not extra dough, into your presents to show how much you care.
5. Dust off those gift cards you received last year. Experts peg the estimated balance of unused gift cards at around $5 billion per year. But new regulation dictates that gift cards can no longer expire, so you can either regift them or spend them to buy new presents for your gift list at no cost to you.

CampusSolutionsInc.com

Welcome to this week’s edition of our Tuesday Top 5, Econ4U’s weekly tips post to help you manage your money in five easy steps.

Gossip Girl and Animal House notwithstanding, college students are usually a lot smarter than their parents give them credit for. But with personal finance education so woefully lacking at the high-school and university level, young adults may easily fall into dangerous money habits before they’ve even received their diploma. Here are some of the most serious:

1. Cosigning on a credit card for a friend. New laws went into effect this year to require every credit applicant under age 21 to obtain a co-signature on the account. When parents are unwilling or unable to cosign, younger students are simply turning to their friends who are of age. This can almost certainly spell disaster for the cosigner, who will be left responsible for the sum total of the debt if the credit-holder defaults.
2. Misusing your student loans. There are myriad ways that people abuse their student loans, from going out to eat to using the money to buy a house. Student loans offer an opportunity to learn about budgeting — something you’ll have to get good at if you want to pay them off quickly.
3. Opening credit cards for freebies. Whether it’s a 10 percent discount at your favorite store or just a tee-shirt, many credit companies offer free stuff to entice students to open new cards. Retail cards are especially insidious because the APR is often much higher than average. Don’t be seduced by freebies unless you know you can pay the bill in full every month.
4. Buying an engagement ring you can’t afford. Roughly 15 percent of college graduates met their mate on campus, according to a 2004 study. But going into debt to buy an engagement ring when you have little to no income and possibly loads of student debt is no way to start a marriage. Avoid the temptation to put a diamond on credit, even if the jeweler (or your future spouse) is more than happy to accommodate you.
5. Not getting work or internship experience. More and more employers are now looking for relevant work experience for even entry-level jobs. If you don’t have any by the time you get your degree, you’re at a serious disadvantage in the job market. Position yourself well by holding down part-time work while you’re still in school or using your summers off judiciously.

BBB.org

Welcome to this week’s edition of our Tuesday Top 5, Econ4U’s weekly tips post to help you manage your money in five easy steps.

You’ve heard of “good debt” and “bad debt,” but if your end goal is to be debt free, you have to just say no to any and all loans. That means you’ll need to choose your priorities in how you repay your bills. Not sure whether you should pay off your mortgage before paying down your credit cards? This primer aims to help you figure out a plan.

1. Knock off your credit card with the highest interest rate. Plastic typically carries the highest interest rate of any of your debt, which means it gets top priority in your repayment plan. If you can afford to spend $1,000 per month to attack your credit-card debt, make the minimum payments on the cards with the lowest interest rates and put the rest of that chunk of change toward the card with the highest. Once it’s paid off, reassess which card has the next-highest rate, and repeat the process.
2. Get rid of your car loan next. Don’t pay interest on a depreciating value for any longer than you have to. Ideally, you should be able to pay off a car loan in 36 months or less. If refinancing under those terms would make your monthly payment unaffordable, consider trading the car in for something less expensive.
3. Third, try to negotiate on your medical bills. If you’re uninsured or underinsured and need medical care, knowing how much procedures should cost can be a useful bargaining chip. The Healthcare Blue Book can give you an idea of what you can expect to pay out of pocket for anything from bloodwork to a hospital stay. Already stuck with a bill you can’t afford? Ask your medical provider for a discount or to waive certain fees — it works more often than you might think.
4. Student loans get the next priority. Benjamin Franklin once said, “If a man empties his purse into his head, no man can take it away from him.” Unfortunately, that’s also why student loans stay with you for life, even if you declare bankruptcy. The interest you pay on qualified education debt is tax deductible under certain conditions, but it counts against you when you apply for other loans (like a mortgage). So pay it down before you try to buy a house.
5. Save the mortgage for last. If you borrow $200,000 on a 30-year mortgage that carries a 4.75 percent interest rate, it adds up to $175,600 in total interest you’ll pay over three decades. But if you get a 20-year mortgage instead, you can save about a quarter of a percentage point in interest in addition to paying it off sooner, which means you’re out only $103,670 in interest over the life of the loan. While mortgage interest is tax deductible, wouldn’t you rather have nearly $72,000 in your pocket?

If you have a major purchase on the horizon — be it electronics, home furnishings, or a vehicle — now is the time to start considering your options to keep costs low and value high.

1. Know the best time to buy. July is when prices on home wares and furniture reach their annual lowest, as stores mark down goods to attract wedding gift-givers. Shop for a new car at the end of the model year for the best discounts — or at the end of the month, when salespeople are most motivated to make their quotas. A little research can mean big savings.
2. Mull it over. Take your time before you spend big to avoid buyer’s remorse. If your garage already looks like an REI, maybe you don’t need that paddleboard as much as you think you do.
3. Comparison shop to save on taxes. It was news to us that Amazon stocks the full range of laptops and other consumer electronics by all the major brands, from HP to Apple. That could mean more than $100 in savings if you buy online versus going to the mall, where you’d have to pay state sales taxes.
4. Put it on a rewards credit card (with caveats). Getting 1 or 2 percent cash back on a major purchase seems like a no-brainer — unless you’re expecting to carry a balance. Then the interest rate will exceed any rewards you’ve received. In that case, consider paying with cash or negotiating zero percent financing at the store you’re buying from.
5. Determine the value of a warranty. Back to cars again: The conventional wisdom says “always buy used,” because of the steep depreciation value on new cars. But when you buy a new automobile, you benefit from the full warranty — something you may pay a few extra thousand for when considering a certified used vehicle. Crunch your own numbers to see what it’s worth to you.

Student loans are intended to pay for your education, but I’ve known a few people who took liberties with exactly how they used that money. Here are some of the worst ways you can spend those checks:

1. Getting a degree in the arts or humanities. This is the sad truth: More than 23 percent of humanities students owe more than $30,000 in student loans, but hiring in that sector is down 40 percent since 2008. Make sure that you can find work that utilizes your degree, or else those student loans will be with you for a long, long time.
2. Paying your mortgage. Student loans include stipends to cover your living expenses, but renting is preferable to buying a house and using the student loan to pay your mortgage. If you plan on moving away from the area after school, houses tend to be poor short-term investments. Maintenance costs may pop up unexpectedly, leaving you short. And in general, it’s a bad idea to take on new debt to pay down old.
3. Funding your discretionary purchases. This one almost goes without saying, mostly because it’s illegal to misuse federal loans. Look into part-time work to buy clothes, dine out, or go on vacation. The reason is simple: Stafford loans carry an interest rate of up to 8.25 percent, and private loans can be even steeper. You’d be better off putting such purchases on a low-interest credit card or taking out a personal loan, rather than assuming more education debt than you need.
4. Paying off credit cards. Speaking of consumer debt, should you ever declare bankruptcy, credit-card debt would be forgiven but you’d on the hook for those student loans until death do you part. Don’t exchange unsecured debt for a loan that is with you for life.
5. Not learning how to budget. While you’re getting your degree, you’re also presented with a great opportunity to learn to budget your money on a fixed income. It is a valuable lesson that will serve you long after you leave the ivory tower.

To end on a happy note, congratulations to all the recent grads!

By now you know why a ship-shape credit score is in your best financial interests: It helps you qualify for the lowest interest rates on mortgages and other loans, saves you from having to put down a deposit on utilities, and it may even help you get a job.

What you may not know is how to add points to your FICO score, so here are a few tips to help you get the awesome perks that accompany great credit.

1. Always pay your bills on time. Payment history is the most important part of your credit score. Even one late payment can ding your score. If you have not been making payments on time, now is a good time to start. Get and stay current on your credit-card and utility bills.
2. Reduce your credit utilization ratio. Outstanding debt is the second-most important factor in calculating your credit score. You can figure out what your ratio is by dividing your outstanding balances by the amount of available credit you have; ideally, it should be under 20 percent. Lenders see high credit utilization as a red flag, and spending up to the credit limits on your plastic kills your score. To improve your score, don’t max out any of your cards and pay down the balances quickly.
3. Keep your oldest accounts open. The age of your credit history is another key component of your credit score; ideally, you want the average age of all your accounts to be at least 8 years. If you open too many new accounts in a short period of time, your score will drop. Likewise, closing an older account with a high credit limit could temporarily knock 50 points off your score. If you think you’ll be applying for a loan in the next year, be judicious about opening new accounts.
4. Maintain a good mix of credit. Showing responsibility for car notes, installment loans, and a mortgage in addition to revolving credit shows potential lenders that other banks have deemed you creditworthy. Some types of credit, like payday loans, are not factored into your credit score. This is a less important metric in your overall score, but consider it a reference for future loans.
5. Don’t sweat it if your score is over 750. While it might be personally satisfying to shoot for the moon and go for a perfect 850, once you’re in the “excellent” credit range you’re already qualifying for the best rates. At this stage, you can sit back and enjoy the rewards.