Here's a topic that will make Thanksgiving dinner awkward: How much are you spending on gifts this season?
Six out of 10 Americans said that holiday spending is a source of marital and familial strife, according to a recent survey from Affirm, a company that offers financing for purchases.
Affirm polled 1,000 adults in an online survey in September.
A third of the respondents are already fretting over how they will cover this year's spending, be it in cash upfront or on plastic.
"The average credit card has six kinds of fees; some have as many as 12," said Ryan Metcalf, chief of staff at Affirm. "You have no idea what that debt will cost you in the next three, six or 12 months."
Here's how to keep your holiday shopping spree from ruining the time you're spending with loved ones.
Best intentions
Going into the yuletide season, many shoppers try to set up a plan to keep their spending from spiraling out of control.
Yet only about a quarter of buyers draw up formal spending limits.
New year, old debts
Shoppers who finance their purchases as opposed to buying with cash will feel the pain long after the decorations have been taken down.
A quarter of participants said that they will use their tax refund next April to pay off any remaining holiday debt.
Buyers who whip out the plastic to buy gifts will find that they're paying far more than just the purchase price.
Six out of 10 respondents who used a credit card to buy presents last year aren't sure how much they paid in total interest on their purchases.
Meanwhile, among the respondents who jumped on "zero percent financing" deals, 69 percent said they ended up paying more than they had expected.
Zero percent financing or "deferred interest financing" allows shoppers to purchase big-ticket items and avoid paying interest for a specified period of time.
Here's the catch: If you fail to pay off the whole balance by the end of the interest-free period, you're on the hook for high interest rates against the original purchase amount – and not the remainder.
Watch for these traps
Metcalf of Affirm pointed out six awaiting holiday shoppers this season. Be on the lookout for the following:
Store credit cards: Don't be swayed by the discount you can pick up at the cash register for snagging a store credit card. Interest rates at some retailers approach 30 percent.
Highest Retailer Rates
| Retailer | Interest rate |
|---|---|
| BrandSource | 30.49% |
| Big Lots | 29.99% |
| Piercing Pagoda | 29.99% |
| Zales | 29.99% |
Source: Source: CreditCards.com
Deferred interest products: "Zero-percent interest" programs come with huge costs after a set period if you haven't paid your balance in full. The Consumer Financial Protection Bureau has called for greater transparency around these deals.
Credit card cash advances: Cash advances are often subject to a higher rate of interest compared to the rate that applies to purchases.The average cash advance rate is about 24 percent, according to CreditCards.com
Extended warranties: Resist the urge to buy an additional warranty from your retailer when you purchase a pricey item. Most big-ticket items won't break within the period covered by the contract, according to Consumer Reports.
Layaway programs: Layaway — in which you plunk down a deposit on a costly item and make a series of installment payments toward it — is an alternative to using a credit card. However, this program has a catch: service and cancellation fees.
Doorbuster sales: 'Tis the season for huge price cuts. Just make sure you keep your spending under control.
"Even with discounts, those sales can add up," said Metcalf. "Stick to your budget and don't cave."
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