The holiday season is probably already putting a pinch on your bank account, and many are still looking for ways to fund the rest of the gifts on their lists. There are many-a-pitfall that can set you back financially for the New Year, which is why many opt to lean on overburdened credit accounts to make it through the holidays. While the immediate happiness that comes with providing gifts to loved ones is great, the long-term stress lies just around the corner once the gifts have been opened and life-as-normal resumes once again.
An older, but still used, method to purchasing your holiday gifts debt free (but with an added cost) is known as layaway.
How Layaway Works
If you haven’t heard of using layaway since the days of your childhood, then maybe it’s time to consider using this as a way to pay off gifts before the holidays. Yes, layaway may seem ‘old fashioned’ to many, but the fact of the matter is that it’s still alive and well in the financial planning of many families.
Layaway accounts work like this: You take the items you want to purchase to the layaway counter and pay a deposit. This deposit ensures that the item is still yours until you pay it off. You can make payments in store or online in many cases, and there’s a service fee for the layaway use.
These contracts typically have an expiration date wherein the items are placed back on the shelves if they’re not paid off. These can range from 30 days to well over a few months with the typical layaway contract lasting around 90 days. There are other details that can change from store to store like cancellation fees, additions, and restrictions, so you’ll need to check with the store you’re using.
The great part about layaway accounts is that your items don’t typically accrue ‘interest’, per se. You’ll be charged a service fee in many instances, but these fees tend to be minimal compared to credit card interest rates.
Fine Print Alert
One downside is that if you don’t pay the remaining balance on your items or if you don’t contact the department before your contract is up, you may end up forfeiting your items and any payments you’ve made thus far. That’s right – you don’t get the gift and don’t get your money back. It’s important to read the fine print of a contract before signing. Many of the big box retailers that offer layaway will give you a refund after taking a fee. Walmart, for example, charges a $10 cancellation fee – but some smaller business may be more likely to keep the payments. Toys-R-Us charges a $5 set-up fee and also a cancellation fee that varies based on state.
Also check to see when the layaway offer deal ends. Walmart’s ended on December 14, so any items not picked up or paid for in full by then were automatically cancelled.
Should You Use Layaway?
Layaway is ideal for those who have a solid plan to pay for their items in a short period of time and in full and worry the item may no longer be on the shelf by the time you get the money together to pay in full. It’s also a nice way to avoid debt and only purchase items you can afford. However, there is a price to pay for the ability to do layaway.