Money

Layaway programs explained

This time of year, large stores often try to push holiday layaway plans on consumers when they go to make big ticket purchases. As you may know by now, layaway is one gift-buying option, but it isn’t always the best option. Every layaway program is different and there are a few things that you should consider before signing on the dotted line.

While every store has their own rules, most layaway programs follow the same four basic process:

1. Pick your gift. Simply go shopping as you normally would and pick out the items you want to put on layaway. Many stores only offer layaway for items in certain departments, such as jewelry or electronics.

2. Make a down payment. The down payment will vary by store. Some actually let you choose the amount that you pay, while others charge a percentage of the total purchase price (usually 15–20%).

3. Pay it down. Once your item is on layaway, you make small payments over time. You can make weekly, biweekly, or even monthly payments, depending on the store’s policy.

4. Pick it up. Once you pay off the total purchase price plus any layaway fees, you can pick up your items. Congratulations.

One of the biggest parts of using layaway programs that you have to watch out for are the fees that come along with it. These include service fees, cancellation fees, and restocking fees. Layaway fees can be exorbitant, especially for smaller purchases. For example, paying a $10 service fee on a $600 laptop may be acceptable, but paying a $10 service fee for a $50 toaster means adding a preposterous 20% to the total cost. It is usually smart to wait until you have the cash to buy smaller items to avoid service fees.

If you need to finance a few of your holiday gifts this year but do not qualify for a credit card or in-store financing, layaway is a fine option. The program also works if you want to try to avoid racking up more credit card debt this holiday season.

However, before you put any purchases on layaway, look at your budget and make sure you can cover the full cost of the item by the due date. If you can’t make payments on time, the store will charge you fees cancelling out the savings you gained from not paying with a card. They may also cancel your layaway program, keeping your items — and your money.

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Layaway programs explained was originally published in Grand on Medium, where people are continuing the conversation by highlighting and responding to this story.
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