How to spend Christmas and stay solvent

THE Christmas shopping extravaganza began in earnest last weekend. For many people this period starts the annual decline into debt that is rarely cleared until summer.

Every year at this time Family Money recommends ways to keep your festive holiday spending under control - ideas like using hard cash only, instead of credit cards and cheque books; setting up a Christmas-only savings account (for next year) into which a few pounds are deposited each week; shop with a list; never shop after 11 a.m. or when hungry or tired.

Two interesting suggestions have been raised this year and deserve special attention. The first comes from a reader, Mrs C from north Dublin who is also a volunteer with a major charity and regularly is called upon to help families cope with the financial pressures placed upon them by Christmas.

"Unemployed and low-income workers have fewer credit options than those with steady jobs and reasonable incomes. Too often the moneylender is the source of Christmas credit and a serious cycle of debt and borrowing happens. But still I've seen a lot of people cope pretty well with moneylending debts and it got me thinking that more of us should consider borrowing a small amount of money - not from a moneylender but from a bank or credit union for Christmas and sticking to that amount and spending no more."

Bank or building society personal loans are certainly cheaper - at an average APR of 10-11 per cent - than moneylender's rates and credit unions traditionally charge 1 per cent per month interest on the decreasing balance of the loan.

A recent British retail survey showed that the average person spends about £500 on Christmas presents and expenses and we can probably take it that Irish figures are about the same.

Borrowing that much cash, and disciplining yourself not to use any other funds would certainly limit the debt you will face in January. With a finite amount of Christmas cash available - and the knowledge that repayments start within the month - thoughtful spending may come more readily to the Christmas shopper.

A big part of the problem with Christmas shopping is the psychological and physical pressures the consumer falls under: stores use every subliminal trick at their disposal to get you to keep moving up the aisles, yet in a high level of discomfort.

They turn up the heat and the lights. They play music incessantly; they pile the aisles high with goods, carefully displaying the most expensive (and hyped) toy or appliance at the end of the aisle for greatest impact. Their message is that your agony will end sooner, and you will be out of the h9t, crowded shop if you just give in and buy the item now.

Once you realise how manipulative the Christmas shopping experience is, it is not that hard to regain control, especially with a bit of help from technology already available in so many households.

Catalogue and mail-order shopping, in which purchases are made using a variety of payments - cheque, postal order or credit card - is being taken one step further with the advent of global shopping by computer. A fortnight ago, Bank of Ireland, in conjunction with Microsoft and Trintech Group launched Shop Ireland, an electronic shopping mall with three anchor tenants, Clery's department store, Guinness Ireland and the House of Ireland, which already has experience of being on the Internet.

Shop Ireland allows Internet users to browse through a range of products, make a selection based on size, colour and then pay for the goods in the knowledge that their credit card details are secure.

Anyone with a personal computer and Internet connection may key into the ShopIreland mall. Using the mouse you can inspect individual items. When a decision to buy is made, you transfer the item into a shopping basket and complete an electronic order form.

The order form lets you know how much you are spending. The order form is then sent via the Internet to Bank of Ireland where the credit card details are checked and payment is authorised. The order is then forwarded to the retailer and the goods dispatched. An electronic purchase acknowledgment is then sent to confirm the order. Payment is processed through the existing credit card system only when the goods are dispatched.

It may be early days for this type of shopping technology, but it is only a matter of time before the number of retailers and choice of goods widens. The flat £5 delivery charge may seem high if your purchase is modest, but it is a small price to pay to be able to avoid the huge amount of time it takes to shop at Christmas. Your credit card limit is also in place as part of this system, making it an ideal way to avoid overspending.

The disadvantage of this form of shopping is that you cannot examine the goods in person. Special care has been taken to give a clear, accurate picture and description of the items being displayed by the Shop Ireland retailers, says the bank.

For those who do not have access to the Internet the following suggestions may assist you in controlling your seasonal spending:

. Prepare a realistic Christmas budget and do not forget to add the cost of extra food, drink and entertainment (bank budget plans in which you can include the cost of Christmas with all your other bills are a good way to avoid overspending in December).

. Always make a list before you go shopping and try to stick to it;

. Try to comparison shop, especially for toys, electric goods and tapes and CD's;

. Restrict yourself to one or two shops for all your gifts. Consider a gift theme this year - say, books only for adults and toys for children; next year, you buy woollens only, or music items, or food gifts. There are now a number of specialist food products available through mail-order. Modest purchases at Oxfam or Unicef shops may solve your Christmas present difficulties and assist these worthy charities.

. Never shop on an empty stomach, with a child, or if you have a headache. Do not wear heavy overcoats.

. Shop first thing in the morning or towards the end old the day when the crowds have thinned.

. Take only a certain amount of cash with you; leave ATM, cheque and credit cards at home;

. If you do decide to use your credit cards, aim to clear the debt quickly. Credit card APR rates vary from a low of about 22 per cent per annum to a high of 26 per cent. If you do run up a substantial bill, think about taking out a term loan - typical APR 11 per cent - to clear the debt in January.

Finally, if you usually pay for your purchases by cheque, you should consider using a cheaper Laser card instead. An average Laser transaction costs approximately 17p as opposed to 24p per cheque.

The attraction of Laser is that you cannot spend what you do not have in your account and purchases or cash withdrawals exceeding your account balance will be rejected. Like a credit card, it can be used if stolen (your signature is on the back), so you need to keep it secure at all times. Like a credit card, once it is reported lost or stolen you will not be held liable for the amount fraudulently spent.