For shoppers looking to budget for the holidays, layaway can be an attractive option. But it is important to know what exactly is layaway, the benefits of a layaway plan, and which department and online stores offer this payment method before making a purchase.
Layaway plans were first popular during the Great Depression but it slowly disappeared as more people gained access to credit. Although layaway plans have been phased out in many stores, using layaway is re-emerging as a purchasing strategy as credit crunch hits.
Through a layaway plan, those lacking a line of credit or who prefer not to charge items to their credit card can purchase items and pay in installments. The Federal Trade Commission recommends using layaway programs as a holiday shopping tip.
The advantages of a layaway plan include no interest on the amount, often only a low fee for the store to hold the item, and the convenience of paying in installments. So, rather than carrying a balance on a credit card that accrues interest, shoppers can still secure big-ticket items and pay over time.
While layaway plans do not charge interest, it is important to be aware of any and all associated fees.
How a Layaway Plan Works
For items such as jewelry and furniture, layaway plans have been a traditional way to afford big purchases. But layaway can be used for all manner of shopping—especially leading up to the holidays. Here's how it works:
- Select item and pay a layaway deposit or fee (ranging from a percentage of the item price to a flat fee)
- Decide on a payment schedule spanning a series of weeks or months
- Pay the remaining balance in installments over the layaway period
- Once the final payment is made, pick up the item or have it delivered
In order to avoid paying unnecessary fees for late payment, canceling a purchase, or re-shelving items, shoppers are advised to ask about for the store’s full policy on layaway items. Find out what the store charges for missing payment deadlines, canceling the layaway, or restocking products.
Paying with a Layaway Plan for Holiday and Christmas Shopping
According to news reports, layaway shopping is becoming more popular as a way to budget for the holidays.
Although fewer stores offer layaway plans than in the past, stores such as Kmart are presently advertising a layaway option. Wal-Mart canceled its layaway program in 2006.
Online Stores that Offer Layaway Plans
But despite stores phasing out layaway plans, online shoppers have increased options for paying in installments. Websites like eLayaway.com, Lay-Away.com, and LayMeAway.com offer layaway plans for online shoppers with a incredible variety of products. Payments can stretch from a period of a few weeks up to 12 months.
From information available in Nov. 2008:
- Lay-Away.com offers layaway plans of up to six months and charges a $35 cancellation fee.
- eLayaway.com charges a 1.9% service fee based on the purchase price of the item. Cancellation fees include a flat $25 and charged service fees.
- Laymeaway.com offers a maximum layaway plan of 12 months and states that they do not charge a fee other than a $25 cancellation fee.
Tips for Shopping through a Layaway Plan
If using a layaway plan to pay for holiday or gift shopping, be sure to save all receipts along with the layaway policy. As the store will have both the merchandise and payments for a series of months, deal only with stores unlikely to go bankrupt—or the store will hold both the items and payments.
For some, layaway programs can be a good way to avoid large credit card balances. When used in conjunction with other budget strategies, layaway plans can help consumers become more credit-conscious and reduce costly interest charges.
More Ways to Save Money
For holiday budgeting, reducing the amount spent per person can make the Christmas gift-giving season more affordable. Read $10 Gift Ideas for Earth-friendly Presents and $10 Gifts that Appeal to Anyone and Everyone for some thrifty suggestions.
