Consumer Reports' Annual Public-Education Campaign Warns of the Pitfalls of Credit Card Debt

/PRNewswire-USNewswire/ -- Consumer Reports today unveiled the third installment of its annual public education campaign, warning holiday shoppers of the pitfalls of credit card debt. Consumer Reports' public education campaign kicks off on Monday, November 24th with a full-page ad in USA Today advising shoppers: "There is no 'bailout clause' in your credit card contract." Americans owe nearly $1 trillion in credit card debt according to the Federal Reserve Board.

A recent survey from the Consumer Reports National Research Center found that 12 million Americans are still in debt from last year's holiday season. Additionally 38 percent of Americans said they plan to use credit cards this holiday season as much as they did last year (35%) or more than last year (3%).

In addition to the full-page ad in USA Today, Consumer Reports will run a series of online ads across highly trafficked or influential personal finance and consumer blogs including Consumerist.com, Yahoo Shopping, and Bargainist.com. The online ads will highlight the Consumer Reports "Tightwad Tod" blog on www.ConsumerReports.org/TightwadTod.

Launched at the start of the holiday shopping season, the "Tightwad Tod" blog covers a wide variety of topics that affect consumers during these tight economic times including advice on getting the best deals during the holiday season -- everything from layaway plans to getting a holiday job to navigating outlet malls. The blog is written by Consumer Reports Senior Project Editor Tod Marks, who has been finding deals and exposing scams in every area of consumer spending for nearly 20 years.

"This campaign reminds consumers that Wall Street's bailout won't cover them this holiday season. If consumers over-extend their credit cards, there won't be a rescue package waiting in the wings, so they need to remain vigilant about spending within their budgets," said Jim Guest, president and CEO of Consumers Union, nonprofit publisher of Consumer Reports. "As an organization that doesn't take advertising, we're using this venue as a way to educate consumers and foster marketplace change."

A Tradition of Public Education and Marketplace Change

This latest effort by Consumer Reports follows a tradition of public education campaigns against gift cards and extended warranties. Last year, the organization took on the retail sector and the ubiquitous gift card with a full-page ad in the New York Times, which advised consumers that $8 billion in gift cards go unused and wind up back in the pockets of retailers. The campaign called on retailers and the National Retail Federation to eliminate expiration dates and service fees. In 2006, Consumer Reports took out a full-page ad in USA Today advising consumers to skip the extended warranty. That ad was rebutted by a full-page ad one week later from the Service Contract Industry Council. Following this campaign, the Consumer Electronics Association reported consumer interest in purchasing extended warranties fell 20 percent.

Which way to pay: Credit, debit, check, or cash

A recent poll conducted by the Consumer Reports National Research Center found that 59% of consumers plan to make a budget before they begin to shop this holiday season. And while making a budget is a good first step, being able to stick with it is quite another. Of the 39% of consumers who said they made a budget last year, 45% were able to stay on budget while, nearly as many (44%) went over budget. Only 3% discarded their budget all together going way over budget.

Consumer Reports advises consumers that whether they make a budget or not this year the method of payment makes a difference. Credit cards offer the most protections for consumers, but consumers who routinely carry a balance will pay more for their purchases once fees and interest charges are factored in.

Consumer Reports recommends the following tips to avoid debt and maximize the method of payment:

-- Cash. Consumers should use cash as much as they can. There's no fear
of identity theft, and it's accepted almost everywhere. Remember to
save the receipt for evidence of payment.
-- Checks. Write a check if you need to make a large purchase somewhere
that won't accept credit or debit and you don't want to carry cash.
Canceled checks can also be useful as receipts or for tax purposes. If
a check disappears, you can stop payment on it, if you act quickly
enough (checks are increasingly being processed in a single day).
-- Debit cards. Use a debit card when you don't mind having the money
withdrawn immediately from your checking account. Debit cards are a
surefire way to avoid onerous credit-card interest charges, but you
could be slapped with burdensome overdraft fees if you don't have
enough money in your account to cover your purchases. With a debit
card, your liability for unauthorized transactions is limited to $50
if you report the problem within two business days of discovering it.
After that the limit leaps to $500. Beyond 60 days of your account
statement you could lose all the money in your bank account.
-- Credit cards. Use a credit card for most large purchases, if you're
not carrying a balance and can pay off the bill each month. Credit
cards offer greater protection than other forms of payment. If you
don't pay off your purchases each month, you'll pay interest rates of
about 12 to 13 percent on your balance, depending on whether your card
has a variable or fixed rate. If your account number falls into the
wrong hands, you're liable for only the first $50 in charges, and most
large issuers waive liability altogether. If you have a legitimate
beef with a seller, it's relatively easy to have the charges removed
until the dispute is settled, if you report the matter to the issuer
within 60 days after the charge appears on your statement.


The Consumer Reports National Research Center conducted a telephone survey of a nationally-representative probability sample of telephone households. 1,001 interviews were completed among adults aged 18+. Interviewing took place over October 16-19, 2008. The margin of error is +/-3% points at a 95% confidence level.

DECEMBER 2008

(C) Consumers Union 2008. The material above is intended for legitimate news entities only; it may not be used for commercial or promotional purposes. Consumer Reports(R) is published by Consumers Union, an expert, independent nonprofit organization whose mission is to work for a fair, just, and safe marketplace for all consumers and to empower consumers to protect themselves. To achieve this mission, we test, inform, and protect. To maintain our independence and impartiality, Consumers Union accepts no outside advertising, no free test samples, and has no agenda other than the interests of consumers. Consumers Union supports itself through the sale of our information products and services, individual contributions, and a few noncommercial grants.

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