Home > 2013 > Personal Finance

7 Huge Mistakes Back-to-School Shoppers Make

Advertiser Disclosure Comments 0 Comments

If you have kids in school—K through 12 or college—you don’t need anyone to remind you that back-to-school season has arrived.

Between 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, Spiderman, 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, except 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 vig of rewards points, you should act as though 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 percent 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 locations. 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. If you’re not sure how many credit inquiries are on your report, check out Credit.com’s free Credit Report Card. It will show you that information, your credit scores and break down the information in your credit report in an easy to understand way.

#6: Taking out a Payday Loan

Payday loans come with average annual interest rates topping 400 percent, 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 percent, which will likely place you deeper into a financial hole. Consider shopping around for a personal loan as an alternative.

#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.

Image: iStockphoto

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team