Layaway programs are back at many major retailers, and these convenient installment plans can make holiday shopping easier without resorting to credit cards. However, many layaway programs come paired with layaway fees. These fees can add up quickly, and there are other risks to using layaway programs.
As with any form of credit, opening a layaway account can put you at higher risk of identity theft. Dishonest store employees or poorly secured customer records can open the door to this crime. In some respects, layaway accounts are higher risk, since you do not have the same purchase protections as if you used a credit card if you’re paying installments in cash, but you are paying a form of interest by paying layaway fees.
It’s a good idea to keep an eye on your credit in any event, and consider one of these top ten mobile apps reviewed by Stumble Forward to help you keep track of your credit history. As long as you are keeping tabs on your personal information and follow a few basic rules for layaway, you can safely use layaway to streamline your shopping this year.
How Layaway Works
Layaway is a type of installment program, wherein a store holds an item for you after you make an initial payment and as long as you continue to make payments on time. Once the item is fully paid off, you can pick the item up, or in the case of larger items have it delivered to your home. There are, however, a few potential pitfalls to layaway programs.
- Although they function like credit, in that you pay by installment, layaway will not help you build a credit history since it isn’t a true line of credit.
- If you fail to make payments, you may need to pay a fee or forfeit installments already paid, and the item will go back out on the sales floor.
- If you pay off the item but don’t pick it up by the agreed upon time, the store may put the item back out for sale. Your installments may be refundable in this case, but you may be facing a layaway fee for not picking the item up.
What to Look for in a Good Layaway Program
A good layaway program should make it easy for you to make payments without exorbitant fees, and provide reasonable guarantees as to the availability of the item once your installments are fully paid. Usually, stores will hold an item in the back of the store once it is put on layaway, but not always. Watch out for this and for limitations on hot items, since some of the most sought after items might not be eligible for layaway. Here are a few other things to look for in a good layaway program.
- Price match guarantee. The best layaway programs offer a price match if you find the same item for a better price while you are making payments.
- Ease of payment. Most stores will let you make payments in the store, but some stores are now offering online layaway payments as well. This ensures that you won’t miss an installment if you can’t make it out in time.
- Reasonable down payments. Expect to pay between 10 and 20% of the purchase price as a down payment to hold the item. Paying higher amounts can defeat the purpose of spreading out payments.
- Clear explanations of layaway fees. Layaway fees include service fees to hold an item, cancellation fees, and restocking fees. Make sure that the fees are clearly explained and a fair value for what you are buying.
The Best Layaway Programs to Use
Although stopping junk mail has its benefits, including that it can reduce your risk of identity theft as Stumble Forward discussed here, it also has its drawbacks. One of these is that you might not find out about certain layaway programs ahead of the holidays without doing some research, as Kmart and other stores are relying on mail fliers to spread the word about new and improved layaway programs. Here are the places with the best layaway programs this holiday season.
- Kmart. Kmart’s layaway program is offering no fee layaway through November 21, for those looking to get an early start. Presumably, the regular service fees of $5 for eight week and $10 for twelve week layaway will kick back in afterwards. Payments are expected every two weeks after the initial installment.
- Walmart. Walmart is offering a layaway program up through December 14. Its program is limited to eligible categories, but those categories include some of the best candidates for layaway, such as electronics, jewelry, and toys. The fee to open a layaway account, $15, will be refunded via a Walmart gift card for all customers who make the final installment on their layaway plan.
- Toys R Us/Babies R Us. Toys R Us and Babies R Us stores are extending their free layaway programs. Initially the companies were only offering free layaway through October 31, but the program has now been extended through December 16. The fee-free arrangement makes up for the high 20% down payment requirement.
As long as you remain aware of the fees and are certain that you can make installment payments on time, layaway fees are not a reason to avoid layaway programs. These programs not only give you more time to complete and pay for holiday shopping, but can also keep gifts out of the house and away from prying eyes until just before Christmas.