With the holiday shopping season underway and the desperate attitude of retailers to lure shoppers into stores, layaway programs are back.
Here’s how layaway programs work:
1. You select an item in the store you want to purchase.
2. You then sign a “layaway contract” where you make payments on the item for the next 8 weeks – or right up until Christmas.
3. You pay fees – lots of them – both a service fee and cancellation fee should you want to get out of the contract before the holidays.
4. A few days before Christmas (or whenever the retailer specifies) and assuming the item has been paid off, you’re able to go into the store and take the item home.
The point of layaway programs is to be able to lock in a good deal now, make payments, and pick up the item before the holidays and once its paid for. This way, you’ve already paid off the item and don’t have to worry about paying for gifts using credit cards.
Here’s a breakdown of the layaway programs from a few major retailers:
1. Best Buy: Applies to any item over $250. You pay a 5% service fee (no refunds on the fee) and pay 25% upfront.
2. Sears: Pay 20% upfront or $20 (the greater amount applies), along with a $5 service. You make four payments until the holidays. Should you cancel, a $10 fee applies.
3. Walmart: $5 fee plus a 10% down payment, as long as the items are over $50. You have to claim your items no later than December 1st.
It’s a wise idea to stay away from layaway programs. Look at all of the fees – you could have purchased another gift.
It’s even better to put the items on a credit card, especially if you have a very low interest rate, of say 0%-3% – which is very possible during the holiday season (many department stores run low interest rate promotions on their credit cards). Do not open up a department store credit card to take advantage of the low interest rates – but if you already have one, that’s a better option than paying all of these ridiculous fees from a layaway program.
And layaway contracts can become addicting, which causes the fees to pile up. Your best option: stick to cash. If you don’t have the cash, then don’t buy the item – it’s as simple as that.
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