“Christmas in July” is the name of a movie in which a man called Jimmy is tricked into believing he's won $25,000 in a national radio contest. (It's from 1940, but the point remains.) He promptly goes out and blows his winnings on a shopping spree. When the truth comes out that Jimmy didn't win, the department store owner tries to repossess all the presents Jimmy bought for his girlfriend, his mother and everyone on the block.
The movie has a happy ending — Jimmy is officially named the contest winner after all — but real life is seldom so benevolent when we overspend. Here are some steps to avoid such a predicament this holiday season:
Examine your finances
Unless you know a windfall is coming your way, setting up a savings account dedicated to holiday spending is an excellent way to avoid running up debt.
Craft a budget to approximate what you can afford to salt away by subtracting expenses from income. It may be useful to differentiate between fixed expenses such as your mortgage or rent, utilities and car payments, and variable ones such as food, entertainment and vacations.
It also may help to review how much you spent on gifts last year. Whatever savings goal you come up with, divide it by the number of weeks left before the holidays to calculate how much to set aside each week.
Setting up the account
Once you have your target, the next step is to set up the account with your bank or credit union and decide how to fund it. If you already have direct deposit set up with your employer, it may be possible to divert a specified sum from each paycheck — $25, $50 or whatever you decide to contribute — to this account.
Automating the process makes it easier to meet a savings target while also “masking” the loss. You don't miss what you don't see.
You might also consider padding the account to go beyond gifts and cover holiday-related outlays for decorations, dining out and traveling.
Staying on track
The earlier you know what you're buying for whom, the sooner you can start monitoring prices and timing your purchases to take advantage of promotions and sales. And if you have a credit card with cash-back rewards, consider using it on holiday gifts to earn a bit on your spending.
As the holidays near, you may also wish to freeze extra spending. This could increase the likelihood you'll reach your goal and avoid excessive debt on other fronts.
If you see your budget is going to fall short of projected costs and want to avoid incurring debt, you may wish to consider paring down your list or the specific gifts you had planned on.
Now, this might sound contradictory, but if you have your plan and are sticking to it, consider using a credit card to actually make your purchases. Why? Because using a credit card can mean better fraud protection, price protection and the ability to earn rewards. When the bill comes in January, you pay it out of the dedicated savings account you'd set up.
Whatever you do, be smart and be responsible with your holiday spending, because most of us can't count on a Hollywood-type happy ending.
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For many people, debit cards are the perfect plastic. They offer most of the conveniences of credit cards with no risk of accumulating debt.
But like credit cards, debit cards are vulnerable to rip-off artists. And debit card fraud is particularly scary because thieves can withdraw money directly from your checking account.
Here's how debit fraud happens and how to protect yourself.
How identity thieves operate
Debit card fraud can be sophisticated or old-school. Thieves use techniques including:
When you bank or shop on public Wi-Fi networks, hackers can use keylogging software to capture everything you type, including your name, debit card account number and PIN.
Be wary of messages soliciting your account information. Emails can look like they're from legitimate sources but actually be from scammers. If you click on an embedded link and enter your personal information, that data can go straight to criminals.
Identity thieves can retrieve account data from your card's magnetic strip using a device called a skimmer, which they can stash in ATMs and store card readers. They can then use that data to produce counterfeit cards. EMV chip cards, which are replacing magnetic strip cards, are expected to eliminate this risk.
Plain old spying is still going strong. Criminals can plant cameras near ATMs or simply look over your shoulder as you take out your card and enter your PIN. They can also pretend to be good Samaritans, offering to help you remove a stuck card from an ATM slot.
Smart ways to protect yourself
Adopt these simple habits to greatly reduce your odds of falling victim to debit card fraud:
- Be careful online: Shop and bank on secure websites with private Wi-Fi. If you must shop or bank in public, download a virtual private network to protect your privacy.
- Monitor your accounts: Review your statements and sign up for text or email alerts so you can catch debit card fraud attempts early.
- Don't ignore data breach notifications: The majority of identity theft victims received warnings that their accounts might have been breached but did nothing. If you get one of these messages, change your PIN and ask your provider to change your debit card number. You can also ask one of the major credit card bureaus to place a fraud alert on your file.
- Inspect card readers and ATMs: Don't use card slots that look dirty or show evidence of tampering, such as scratches, glue or debris. And steer clear of machines with strange instructions, such as “Enter PIN twice.”
- Cover your card: When using your debit card or typing your PIN at an ATM, block the view with your other hand. Go to a different location entirely if suspicious people are hanging around the ATM, and if your card gets stuck, notify the financial institution directly rather than accepting “help” from strangers.
Even if you've taken precautions, debit card fraud can still happen. If your card gets hacked, don't panic. Tell your bank or credit union right away so you won't be held responsible for unauthorized charges, and file a complaint with the Federal Trade Commission.
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