Holiday tipping advice for 2009

In what's becoming an annual tradition around here, we've posted our holiday tipping advice for 2009, based on surveys conducted by the Consumer Reports National Research Center. 

Alas, for those on the receiving end, it looks like tips may be a bit smaller this year. 

For tip givers who feel a need to cut back, one way to sweeten your generosity is to tip a little earlier in the season. Your recipients may appreciate it — they probably have people to tip, too.

Some other no-extra-cost tips:

• Crisp new bills from the bank will seem more special than wrinkly old ones out of your wallet.
• A handwritten note is nice too.
• And if possible, try to deliver your tip in person.

If you have ideas to share, either as a tip giver or recipient, we'd welcome your comments.

A reminder of gift-card gotchas

Every year at this time, gift cards become a hot topic, and we’ve written more than our share on the subject, explaining the various tricks and traps. 

Nevertheless, gift cards remain one of the most popular gifts to give and to get, though last holiday season marked the first time in four years Americans actually reported receiving fewer cards, according to our latest Consumer Reports holiday shopping poll. Moreover, one of four gift-card recipients have yet to redeem a card they received in 2008.

Bankrate.com, a personal finance Web site, just released a new study comparing the terms and fees associated with 29 different gift-card issuers. Bankrate’s findings are a clear reminder that all cards aren’t created equal. You can read the entire report by clicking here. In short:

• If you don’t spend the card after the first 12 months, you could be hit with unexpected fees. In September, American Express announced it would no longer charge a $2 monthly service fee after 12 months -- and that change is retroactive to old cards, too. However, Bankrate’s study found that Discover, MasterCard, and Visa still tack on a $2.50 monthly maintenance fee after 12 consecutive months of inactivity.

• Store gift cards are free, others aren’t. There’s typically no charge to purchase a gift card from your favorite merchant. But if you choose to buy the gift card online instead of at the store, you could be hit with a handling fee. At Starbucks, for example, the fee is $1.50. Credit-card issuers, by contrast, always charge a purchase fee, typically $3.95, though it can vary depending on the card’s value.

• Pay attention to the "valid-thru" date. It’s something you’ll find on cards issued by credit card companies. While technically not an expiration date, it reflects the estimated lifespan of the card’s magnetic stripe. Shelf life for the stripe is about five years, and if you have a card with a past-due valid-thru date, contact the company for a replacement card.

• When buying a gift card from an individual merchant, be sure to ask if the card is valid for online use. While it’s not an issue for most retailers, some companies such as CVS, T.J. Maxx, and Marshall's do not allow their gift cards to be used online, Bankrate says.

• The federal Credit CARD Act pertaining to gift cards takes effect on Feb. 22, and the regulations require that the cards remain valid for at least 5 years, unless that information is clearly disclosed on the card. Dormancy, or inactivity, fees will still be allowed after 12 consecutive months of inactivity.

 Postscript: Don’t throw away those old gift cards

Speaking of gift cards, here’s a lesson in how persistence can pay off handsomely. On a recent shopping trip to a Bloomingdale’s in New Jersey, my colleague Donna Tapellini presented the cashier with three $50 store gift cards, two of which had expired, according to the saleswoman. Tapellini was annoyed and prepared to walk away, but her partner, Corey Glaser, who’s doesn’t easily take no for an answer, wasn’t about to give up.

“Isn’t there something we could do?” Glaser asked the clerk, emphasizing the fact that the couple had just given the store plenty of business.

The clerk, clearly peeved and dismissive, suggested Glaser and Tapellini call the phone number on the back of the cards, though she didn’t hold out much hope. They called anyway.

After entering the serial number for the first card, the automated robot voice on the other end confirmed the fact the card was expired, but then instructed them to “press one.”  Upon doing so, the voice said, “Your card has been activated.” The same thing happened with the second card. By investing a couple of minutes, they found $100. Not bad.

Medicare Part D participants: For 2010, you better shop around

Medicare has announced its Part D drug plan costs for 2010. More seniors than ever will be combing through that data to try and find a better deal. Sixteen percent say they are likely to, or are considering, switching plans in 2010, according to a recent survey of seniors by Allsup, a provider of Social Security disability, Medicare and workers' compensation services. That’s a big jump; only five percent have switched since they’ve been eligible for the program.

However, figuring out which program is best for you can be a pain. You may have dozens of private plans to choose from, with different levels of coverage.

But staying put can cost you plenty, in terms of both access to the medicines you take and the amount of money you will spend. Consumers Union has been monitoring the total cost of buying five common drugs in five states since the Part D program began in 2006. Next year Illinois residents, for example, may be able to save more than $2,200 year if they switch to a better plan. Stay stuck in the wrong one, however, and your costs may rise by more than $1,500.

Open enrollment starts November 15 and runs through the end of the year. You can find out how to switch plans (or enroll) by going to the Centers for Medicare and Medicaid Services Web site.–Mandy Walker

CR Index: 25% to spend more on personal electronics

A quarter of Americans–24.9 percent–expect to spend more this month on personal electronics, according to the Consumer Reports Index, a composite of five indices measuring consumer behavior, attitudes, and consumption patterns. And short-term plans to purchase major home electronics rose slightly, to 10.7 percent from 10 percent in October, the highest level since June.

In addition, perceived financial problems, including difficulties making credit-card payments and covering medical bills, may be stabilizing, according to the Consumer Reports Trouble Tracker and Stress indices, two components  of the Consumer Reports Index. In the West and South, survey respondents reported fewer troubles in early November than in the prior month. In the Midwest, perceived troubles appeared to be slightly (up 2.4) worse. Northeasterners’ opinions stayed about the same.

Those optimistic results are the bright spots in a report that generally shows consumer plans and attitudes at a slow simmer. Two weeks before the official start of the holiday shopping season, planned purchases were flat or lower in most categories, including appliances, yard and garden goods, cars and homes, according to the Consumer Reports Next-30-Day Retail Index. (The survey underlying the Index was completed before Congress extended and expanded a one-time $8,000 tax credit for new-home buyers.)

Ed Farrell, a director of the Consumer Reports National Researcher Center, which created the Index, posed a cautionary note. “The economy remains in a precarious position where further decline is possible but is slightly less likely,” Farrell said. “Unless consumers can see concrete improvements in their lives and retail activity picks up, any near term recovery is improbable.” 

For more details and information on how the Consumer Reports Index is conducted, click here.

Avoiding post-holiday debt: Don't be among the 13.5 million!

This holiday season, it may be more important than ever to avoid impulse buying that leaves you with a holiday debt hangover in the New Year. A survey we conducted in early October showed that six percent of adults, or roughly 13.5 million consumers, were still saddled with debt from last year’s holiday spending.  

Odds are you’ll be paying especially hefty finance charges this year if charging a lot of gifts leaves you carrying a balance on your cards. That’s because many banks are jacking up rates or imposing other finance charges in the form of annual fees before their ability to do so is crimped by federal credit card reform rules that become effective in February. For instance, Wells Fargo recently notified cardholders it plans to raise interest rates by 3 percentage points starting Nov. 30, while Citibank in late October hiked rates for many of its customers to 29.99 percent.

The good news is that many consumers already are making progress in slashing their card debt. A recent Consumer Reports survey found that more than a third of consumers polled said they had paid off and closed a card account this year.  And the Federal Reserve’s latest monthly Consumer Credit Report showed that revolving credit, which is largely card debt, decreased at an annual rate of 13 percent in August, to a total of  $897.6 billion. That’s down from $988.2 billion at the end of 2008.

Tightwad Tod offers some helpful tips on how to avoid holiday debt headaches here.-Andrea Rock

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

The Great Recession: Where's the consumer's voice?

A report recently published by the not-for-profit Pew Research Center's Project for Excellence in Journalism reveals some interesting biases in the media when covering the Great Recession. For one, the report says that TV, print, radio, Internet and other news media focused an awful lot on players at the top–President Obama and his staffers, federal agencies, and business leaders–as opposed to folks at the bottom of the ladder, often suffering the most. The stimulus package, the banking bailout, and efforts to help the struggling auto industry were the dominant topics. Most coverage took place in New York and Washington, the capitals of finance and government, respectively. And when the stock market started to rise, coverage started to peter out. 

For that reason, I'd like to brag a bit about the monthly Consumer Reports Index, which asks consumers for their sentiment on the state of their own financial well-being. That includes not only what they spent and did over the prior month, but their spending plans for the next month. The index results are based on answers by a nationally representative sample. Stay tuned for the next index, about halfway through the month, for a unique gauge of what's going on close to the ground, not up in the vaulted realms of power.–Tobie Stanger

Consumer Reports Index: Consumers' mood low, troubles rise

Consumer sentiment remains low for many Americans, and consumers are reporting more financial troubles, according to the latest Consumer Reports Index, published today. Lower-income people—those making less than $50,000 a year—are shouldering more financial pain than the rest of the population. And consumers living in the Western part of the U.S report a worse financial outlook than do those in other regions. 

The Consumer Reports Index, a composite of several measures, shows consumer sentiment nationwide at 40.3, rising only slightly from a low, 38.1 last month. When the index is greater than 50, more consumers are feeling positive about their financial situation. 

At the same time, this month's Consumer Reports Trouble Tracker Index, which measures negative household financial events, rose to 66.7, its highest ever. The percentage of consumers who reported negative events dropped slightly, but the total number of negative events was up, from 1.6 to 1.9 per household, the greatest increase in 6 months.

Some details:

• Job losses mounted. The Consumer Reports Employment Index declined markedly in October. The proportion of respondents reporting job losses was 7.7 percent, compared with 5.6 percent last month.

• Lower-income households had more troubles than average. The Consumer Reports Trouble Tracker revealed that more than a quarter (26 percent) were unable to afford afford medical bills or medications in the past 30 days, versus 15.1 percent for all Americans. Twelve percent of this group lost a job or was laid off, compared with 7.7 percent of the general population. Another 12 percent lost medical care or experienced reduced coverage, compared with 7.2 percent of total respondents.   

• Spending stayed the same. The Consumer Reports Past 30-Day Retail Index shows purchases in the past 30 days about the same as in the prior month. The index was up for major appliances, but down for major home electronics and personal electronics. 

• Consumers plan to spend more for electronics, but not for other items. Planned purchases of personal and major electronics were up for October versus the prior month. In general, however, plans for future purchases remained about the same as our measure in September. 

• Sentiment was worst in the West. Consumer sentiment took a dive in the West, down to 32.8. In the North/Central region and the South, sentiment remained even, at 41.9 and 43.2. Residents in the Northeast reported a modest uptick in consumer sentiment, to 42.3.

"The economy is in a precarious position balanced between recovery and further decline," concludes the report, published by the Consumer Reports National Research Center. Without substantial improvements as measured by the Trouble Tracker, Employment and Retail indices, it adds, "it is doubtful that a meaningful consumer recovery will be mounted in this calendar year."

The Consumer Reports Index reflects results of a nationwide, representative survey of Americans conducted last week by the Consumer Reports National Research Center. To read more about the Consumer Reports Index, including how it was conducted, click here.

Halloween '09: Homemade costumes, fewer store-bought sweets

Scary family finances will be spooking a lot of folks this Halloween, according to a recent poll by the National Retail Federation. This year, consumers expect to spend an average $56 on the holiday, compared with $67 last year, the survey found. Nearly a third said the economy was to blame.

Nearly half said they'd buy less candy, while more than a third said they wouldn't add anything new to last year's decorations. Another third said they'd reuse or make costumes. Given the state of many folks' finances, the costume pictured here might be just the ticket.

For more healthful and potentially less-expensive treats, consider this evergreen advice from Consumer Reports Health. And if you've got other ideas for Halloween savings, feel free to comment below.–Tobie Stanger

Splurging on savings

Consumers have scaled back their spending in a major way since the economic crisis started last year. Federal Reserve data show that in July Americans cut their use of revolving credit, mostly credit cards, by 8 percent over the previous year. And the personal saving rate in the US was 4.2 percent in July, up from zero in April 2008, according to the Bureau of Economic Analysis.

Our new reality is reflected in the findings of a recent survey by the Consumer Reports National Research Center: 71 percent of respondents said they purchased only what they absolutely needed; 61 percent said they ate dinner out less often; 58 percent spent less on vacations; and 53 percent used their credit cards less.

Even more heartening to those of us who preach financial responsibility, many respondents said they would continue those behaviors after the recession is over. For example, 39 percent reported that they’d put more money into savings, and 95 percent said they’d continue to do so once the economy recovered. Ninety percent of those who put less on their credit cards said they’d continue to keep a lid on charges.

We also asked respondents what they would splurge on when the recession was over. The most often mentioned indulgence was a vacation (17 percent), followed by nothing (15 percent). Then we posed the question: If you were to win $10,000 tax-free and could use it for only one purpose, what would you do? Two-thirds of the respondents said they would pay off their debts or put it into savings or investments.

Now that the economy is showing signs of recovery, we may soon see if consumers retain the lessons learned through this difficult period and follow through on those good intentions.—Noreen Perrotta

Noreen is the editor of the Consumer Reports Money Adviser newsletter.