Why you don't need an extended warranty

This holiday season, shoppers are expected to spend over a billion dollars on extended warranties for laptops, flat-screen TVs, other electronics, and appliances.

And almost all of it will be money down the drain.

Retailers are pushing hard to get you to buy extended warranties, or service plans, because they're cash cows. Stores keep 50 percent or more of what they charge for warranties. That's much more than they can make selling actual products.

Shoppers have begun to take note of the practice, and they don't like it: In a recent survey, the Consumer Reports National Research Center found that over 60 percent of consumers cited aggressive pushing of extended warranties as their top shopping annoyance. We included that fact in our annual "Dear Shopper" warning about bad deals for consumers – the second time we've singled out extended warranties in our holiday-season advice.

For the consumer, extended warranties are notoriously bad deals because:

• Some repairs are covered by the standard manufacturer warranty that comes with the product.
• Products seldom break within the extended-warranty window—after the standard warranty has expired but within the typical two to three years of purchase—our data show.
• When electronics and appliances do break, the repairs, on average, cost about the same as an extended warranty.

In general, we have found extended warranties to be a bad deal for the customer and have long advised against them. The most cautious consumers might want to consider an extended warranty for a repair-prone brand, provided that the warranty is both inexpensive and comprehensive and the cost of repairs tends to be high.

Shoppers say: Don't ask for phone # and e-mail at checkout!

Facebook and its ilk may have changed attitudes toward broadcasting personal facts and feelings, but there's one venue where a majority of Americans do not want to share: The checkout counter. 

Fifty-eight percent of consumers bristle when checkout clerks ask for e-mail addresses and phone numbers, according to a recent, nationally representative poll conducted by Consumer Reports, and assisted by our sister Web site, The Consumerist. That's in addition to our annoyance with checkout-counter solicitations to open store credit-card accounts, disdain for stores' obsession with extended warranties, and frustration with too few open registers.

Retailers, hear us, please. It's challenge enough during the holiday season to get a parking spot, navigate through malls and store aisles, spend within our budgets, and get to the front of checkout line in one piece. We don't want to have to share our personal information, which retailers use to hone their marketing programs or, if you will, pester us more.

There's nothing wrong with politely refusing to tell the checkout person that information. The store doesn't need it to complete the sale, and isn't going to turn you away if you say no. And there's good reason to resist: The more information floating around about you, the more likely your name will land on mailing, phone and e-mail lists used you more stuff you may not want or need. Consumer Reports Money Adviser recently reported on many of the ways retailers and service–providers use your personal information, as well as tactics to reduce your vulnerability. Do yourself and your family a favor and just say no.

Holiday shoppers say some retailers are out of line

Bell ringers, perfume sprayers and the steady drumbeat of holiday music may be annoying to some shoppers. But what really brings out their grinchier instincts are stores that fail to open all the checkout lanes and then use pushy retail tactics when shoppers finally make it to the cash register. Customers don't like being pressured to open store credit cards or being asked for personal information. And they really object to being hounded to buy extended warranties, according to a nationally representative survey by the Consumer Reports National Research Center.

The survey was conducted as part of Consumer Reports' annual "Dear Shopper" campaign that highlights holiday gotchas and shopping traps. This year Consumer Reports had an assist from its sister Web site, Consumerist, which collected a list of annoyances from its readers. When the list was taken to the public at large, those surveyed were in agreement. Here are the top gripes about retail practices:

• 72% Stores that don't open all the checkout lanes;
• 68% Fake "sales". If something is always 20% off, it's not on sale;
• 67% Coupons that exclude almost everything in the store;
• 62% Being hounded with the extended warranty sales pitch;
• 58% Cashiers that ask for your phone number or other personal information;
• 56% In-store prices that do not match the same company's on-line prices;
• 53% Employees required to up-sell you at the register;
• 52% Pushing store credit cards at the register;
• 50% Mail in rebates;
• 48% Stores that require loyalty cards to get discounts;
• 43% Stores that have a minimum purchase requirement for credit cards;
• 26% Receipt checkers.

 “Consumers have told us that they just want a hassle-free and convenient shopping experience," said Jim Guest, president and CEO of Consumers Union. "We really hope this list of holiday annoyances is a wake-up call for the retail industry.”

Tomorrow's USA Today will feature the latest "Dear Shopper" ad about "pushy holiday-season practices." In previous years we've tried to educate consumers about gifts cards (too many go unused), consumer debt (13.5 million consumers are still carrying debt from last year's holiday) and extended warranties (usually not needed—or recommended).

When we asked shoppers about the number one non-retail practice that made them grumpy almost a third said the crowds (29%) followed by difficulty parking (28%), sales people spraying perfume (16%) and bell ringers outside stores (13%). Surprisingly, few folks are annoyed by that holiday music—only three percent said that was their top pet peeve. Fa-la-la-la-la indeed.

What you can do

• Don't get snagged by those gift card gotchas
• Resist sales counter store-card pitches
• Just say no to giving personal information at the checkout
• Why you don't need an extended warranty

At the sales counter, resist the store-card pitch

After waiting in an interminable line to buy holiday gifts, one thing you might not want to hear when you reach the checkout counter is a pitch for a retailer's credit card. In our nationally representative survey of the top holiday-shopping annoyances, 52 percent of respondents said they don't care for cashiers pushing store credit cards.
 
Of course, the 10 percent to 20 percent discounts that come with the store card on the goods you're buying can be tempting, especially this year when many people are trying to stretch their holiday shopping dollars. But if you don't typically pay your credit cards in full each month, you should decline the cashier's offer. And of course, before you sign up for any credit offer, you should read and understand all the terms and conditions of the account—something you might not be inclined to do with a long line of shoppers waiting impatiently behind you.
 
Here's the good and bad of store cards:
 
The Bad:
Interest rates can be wickedly high. For example, Macy's store card (which gives you 20 percent off your purchases for two days when you sign up) comes with an interest rate of 24.5 percent compared with a national average for credit cards of 12.81 percent as of Nov. 12, according to LowCards.com. If you miss a payment, any savings you get for opening a store card could quickly evaporate at such high interest rates.

• Opening a card will temporarily ding your credit score by only a few points, but opening a bunch of cards at once could have a real effect on your credit score.
 
• If you start using the card quite a bit it can lower the amount of rewards or cash you earn on your primary credit card.
 
• You might spend more than you'd planned, just to take advantage of the discount. And having a retailer credit card with rewards may entice you to spend more at that particular retailer, instead of shopping around for the best price.
 
• Store cards may not have the same consumer protections as credit cards. However many retailers offer both a store card and a Visa- or Mastercard-branded card that may give you some of those protections.
 
The Good:
• You can get a discounts of 10 percent to 20 percent on your initial purchases.
 
• If you frequently shop in the store—and you always pay your bills on time—you may be able to build points towards future purchases, get advanced notice of sales, or gain access to insider sales. But some retailers offer rewards or loyalty programs that don't require you to sign up for credit cards. 

• Store cards are easier to qualify for than general-purpose credit cards. So if you have limited credit, opening an account with a retailer is a decent way to build a credit history. But don't cancel the card immediately. You want to establish a long credit history, so if you're worried about overusing the card, cut it up, hide it at the back of your wallet, or leave it at home.—Chris Fichera  

It's wise to look a gift card in the mouth

Nearly half of American polled in our recent Consumer Reports Holiday Shopping Poll said they expected to purchase gift cards for families and friends. It's no wonder: They're a nice proxy for cash, and perfect if you don't know what else to give. They're also a useful as a tip for folks who provide service to you year-round.

Gift cards have their drawbacks. American Express recently rescinded monthly fees on its gift cards in time for the holidays, but retained other fees. Other issuers still may require fees and expiration dates. The Credit CARD Act of 2009, scheduled to become fully effective in February 2010, would prohibit gift-card fees for at least one year after purchase, and prohibit expiration dates earlier than 5 years. (The Senate has yet to approve legislation passed last week in the House that would speed up most aspects of that law to December 1 of this year.)

Fees and expiration dates notwithstanding, gift cards have additional drawbacks, in terms of how they're used. Listen here to Tightwad Tod and be forewarned!

Ready or not, here come the holidays

Although the Halloween decorations may still be tacked to the door and most of us haven’t thought about our Thanksgiving menus, it’s not too early to begin talking about holiday shopping and everything that goes with it – the traffic, the crowds, the long lines, and the deals.

 As you may have read here on the Money blog last week, the results of our first holiday poll, designed to gauge what Americans will be buying this season, how much they’ll be spending, and whether the ongoing economic crisis is dampening their festive spirit, indicate that 2009 is likely to be a carbon copy of last year.

Once again, consumers said they plan to cut back this season. Sixty-five percent of those polled, in fact, said they intend to do less traveling, entertaining, and spending on gifts. That’s on top of the three-quarters of consumers who told us last year they planned on tightening their belts.

It’s easy to understand why so many consumers continue to watch their wallets. Statistics released today by the U.S. Bureau of Labor Statistics reveal that the unemployment is at its highest since April 1983. In October, unemployment rose from 9.8 percent to 10.2 percent, as the ranks of the nation’s out-of-work force swelled by 558,000, to 15.7 million. In retailing alone, more than 40,000 jobs were lost last month.

Despite the grim statistics, Americans remain largely optimistic. Eighty-seven percent of survey respondents said they expect to be at least as happy this holiday season as they were last year; 33 percent are predicting they’ll be even happier. So hope does spring eternal.

While we can’t do much in the cheer department, we can offer advice on how to take advantage of the latest retailing trends in order to stretch your shopping dollars. And that’s what we’ll be doing over the next couple of months. The results of our second poll, due out soon, promises to offer insights into the nation’s shopping habits – the extent to which the Internet is figuring more prominently in our purchasing plans, where consumers think they’ll find the biggest bargains, and the must-have presents on their Black Friday shopping list. We’ll also be identifying the most annoying aspects about holiday shopping, also based on a nationwide survey.

As you put together your shopping list, here are a few tidbits to keep in mind, based on a closer look at the results of our first poll:

 • Gift cards. They’re one of the most popular gifts to give and receive, yet one of four recipients still haven’t used at least one of the cards they were given last year, mainly because they couldn’t find anything they wanted to buy.  Moreover, 65 percent of those who used their gift cards – especially women -- purchased an item that priced in excess of the card’s face value. That explains why retailers push card sales so aggressively.

 • Who doesn’t like clothes? Clothing is the biggest holiday gift category and, like gift cards, people love to give and receive apparel. But survey respondents told us that clothing also tends to disappoint the most. If you want to be a hero for the holidays avoid giving socks, shirts, sweaters, and ties, the least desireable of garments and accessories. Also making the most-reviled list this year for the first time: slippers.

 • New favorites. Most people tend to give and get the same presents year in and year out. But our poll revealed several new items that made the list of gifts respondents said they’d be thrilled to receive: boots, purses, pajamas, and guns. The latter’s not a typo, and we’ll avoid making any value judgment. We’re just reporting the facts.

• Fewer people are planning to give money. Despite the fact that money ranks behind only electronics and gift cards as the present they’d most like to receive, Americans won’t be opening their wallets as wide this season. Only 44 percent are considering giving a cash or check this year vs. 61 percent in 2008.

 • Women more likely to scale back on gifts to others. Here’s a statistic we didn’t see coming. When asked whose gifts do you plan cutting back on to save money, women were more likely than men to target family (including their children), friends, co-workers, and service providers (hair stylist, deliver person, etc) instead of themselves. Men, on the other hand, more willing than women to cross teachers and the family pet off their lists.

Holiday regifting: How to do it right

Consumer Reports Holiday Shopping Poll recently reported that this year, 36 percent of Americans plan on regifting–that is, giving a gift they received to someone else. That's up from 31 percent the year before. Our own Tightwad Tod discusses the phenomenon here. 

If you think you'll be among that population passing on the wealth, consider these tips, adapted from Regiftable.com, a Web site sponsored by Money Management International, a not-for-profit credit-counseling service: 

•Ensure the gift is something you really can give again. Handmade or one-of-a-kind items are taboo for regifting. Same for signed books and monogrammed items. Appropriate goods might be bottles of wine, unopened boxes of candy, new household items and inexpensive jewelry. 

•Check the condition. Give only new, unopened packages.

•Consider the gift's desirability. If you don't like it, do you really think someone else will?  

•Think: Can you get away with it?  Make sure you don't give back the gift to the giver. Regift to folks unlikely to see or know the original giver. And consider whether you can keep the secret, without guilt.

•Wrap it up nice. Use new wrapping paper and a new card or gift tag. Only reuse gift bags in good condition.

•Explore other options. You also could donate the gift to a charitable group's thrift shop or holiday gift drive. Assuming you know its value, you could get a tax deduction in the deal, as well.

In holiday cutbacks, pets fare better than husbands

A survey on holiday shopping plans released this week by Consumer Reports found that among folks considering trimming their holiday spending this year, women were more likely to cut back on giving to their spouse than to the family pet. Twenty-two percent of women who expected to reduce holiday spending said they'd be spending less on their spouses. That compares with 14 percent planning to trim the fat on Fido's bones. Men, on the other hand, were more even-handed; about the same percentage were willing to cut back on their significant other (17 percent) as on their pet (19 percent).

Perhaps women favor their pets in gift-giving because a cat won't sigh heavily and roll its eyes after getting slippers instead of a GPS. To ensure you've got more left over in your pet budget for the fun stuff, check Consumer Reports Money Adviser's advice on saving on pet expenditures. And here are some tips on buying pet toys. Check this blog next week for more results from the Consumer Reports Holiday Shopping Poll.—Tobie Stanger

Holiday poll: Shoppers are tightening belts, not buying them

Trim the tree? Deck the halls? Trim the budget is more like it this holiday season, according to the new Consumer Reports Holiday Shopping Poll. Consumers are cutting back their holiday spending and using creative ways to fill the gift gap by re-gifting presents they've been given, cutting back on spending and culling folks from the gift list. The family pet stands a better chance of getting the goods than a co-worker or the mail carrier.

Times are tough, as respondents reminded us, and a few fessed up to having debt left over from last holiday season. Surprisingly, the belt-tightening has not dampened enthusiasm for the holidays -- 87 percent of consumers remain hopeful that the upcoming season will be as happy or happier than last year.

Even though many stores have been featuring Christmas items since well before Halloween, most shoppers are not taking the bait. Only 31 percent reported that they had started their holiday shopping. And one-quarter of those asked said that they expect to be making purchases in the days leading up to Christmas and beyond. That follows a pattern we've seen for the previous two years in good times (2007) and bad (2008).

As in 2008, consumers anticipate spending less this holiday season. This year 65 percent of Americans plan to cut back on overall holiday expenses. The anticipated decrease in spending comes on top of already dramatic cutbacks that occurred last year when 76 percent of those surveyed said they planned to cut back their spending. The result is that shoppers are shrinking their gift lists and narrowing the types of products they shop for.

The first person to fall off the gift list is likely the person making it. More than three-quarters (78 percent) of adults who are cutting back on gifts will be buying less for themselves. Half are also cutting back on gifts for others -- friends and some family members are the next to go. Grandchildren and grandparents stand the best chance of getting something this season and only 16 percent plan to skimp on gifts to pets and teachers.

Gift lists
We took a peek at some of those shortened gift lists and -- spoiler alert -- the top items that adults are planning to give this year are clothing (52 percent) and electronics (51 percent). In the electronics category, video games or accessories topped the lists followed by game systems and MP3 players or iPods.

Clothing was both the favorite and least favorite gift received last year: 37 percent of respondents were disappointed and 20 percent were pleased with their apparel. If you're planning to give clothing, stay away from socks and slippers, which were a bummer for recipients. Boots, on the other hand, make that foot, were a newcomer on the list of favorite clothing, joined by purses and pajamas.

Overall, shoppers said they are planning to shop for fewer types of products so expect to see less jewelry and fewer small appliances under the tree. There are exceptions, of course, including laptops, netbooks and desktop computers, GPS navigators, and smart phones and cell phones.

Most wanted
Gift cards tied with electronics for the most wanted gift this year, a departure from last year when electronics trumped gift cards by nine percentage points. Meanwhile, fewer folks (46 percent) are planning to give plastic. Perhaps they've been paying attention to our cautions about gift cards, which often saddle recipients with fees, expiration dates, and other gotchas.

Of those who were given gift cards last season, 65 percent say they typically spend more than the value of the card. Then there are those who didn't redeem them at all (another reason we think they're a bad idea). One quarter of those given gift cards last holiday season still have at least one they haven't used and 11 percent of recipients have four or more.

Maybe they can re-gift them this year -- that's another trend we're seeing. Over a third of respondents (36 percent) admitted to re-gifting something they had been given  -- a big jump over the 24 percent who said so in 2007. Socks anyone?

Now about that debt. As of early October, when the survey was conducted, six percent of adults -- or about 13.5 million Americans -- were still carrying debt from last year's holiday season. In households with children under 12 years old, 10 percent were carrying debt.

From now until the end if the year we'll be offering holiday help including advice from our resident shopping expert Tod Marks, featured in the video above, who will be posting on this blog frequently.

Methodology: The Consumer Reports National Research Center conducted a telephone survey of a nationally representative probability sample of telephone households.  1,000 interviews were completed among adults aged 18+.  Interviewing took place over October 15-18, 2009.  The margin of error is +/- 3% points at a 95% confidence level.