Should You Shop on Layaway?

Christmas Shopping© George Doyle/Stockbyte/Thinkstock
You could really use a new dishwasher, and your daughter is dying for a pair of pearl earrings for Christmas. Unfortunately, you don’t have the funds to make two big purchases this fall. Or do you?

Layaway plans have been making a comeback at major retailers recently, thanks to a sluggish economy and many consumers’ reluctance to add to their already ballooning debt. These days, you can even make layaway purchases online.

Is layaway the right choice for you? The Better Business Bureau recommends considering the following factors to help you decide:

1. How long do you have to pay?
Unlike credit cards, which allow you to carry debt indefinitely as long as you pay your monthly minimum, layaway plans have a definitive end date. If you don’t pay the item off in full by that date, you lose the item as well as your down payment and a service fee.

2. When are payments due?
Consider whether you’ll be able to make each payment on the date it’s required. Do payment dates coincide with your pay schedule? Will the store be flexible about altering the schedule so it works for you?

3. What is the down payment?
Your down payment is non-refundable, and you’ll lose it if you fail to make all of your layaway payments. What percentage of the purchase price is the down payment? Is it reasonable?

4. What other fees are required?
Most layaway plans include a service fee and some also require storage fees. Think about whether adding these fees on to the purchase price is worth it to you. Would waiting until you have enough cash on hand, or buying the item with a credit card be more economical?

5. What are the penalties for missing a payment?
In some plans, missing a payment may mean losing the item and your down payment and fees. Read the fine print carefully to make sure you understand the consequences of missed or late payments.

6. Can you get a refund if you change your mind?
If you’re not 100 percent sure you want the item, this is a big one to consider. Make sure you understand the plan’s refund/return policy before you make a purchase.

7. Is there a policy for sale items?
If an item you’ve put on layaway goes on sale, will your plan reflect the new price? Ask a representative to explain the store’s policy in this situation.

8. Are the store and its layaway partners reputable?
Many retailers employ a third party layaway service as a middleman for layaway purchases. Check the Better Business Bureau (BBB) ratings of both companies, and look online for any customer feedback about the plan.

Sources: Better Business Bureau, Moneyland

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