Holiday layaway 101: Don't sacrifice savings for convenience

Layaway programs have already been rolled out by retailers like Walmart, Toys 'R' Us, and Kmart to lure holiday shoppers. Layaway, which lets shoppers pay for items in installments, can seem like a good option for shoppers who want to stick to a budget, but there are downsides. 

|
Peter Barreras/ AP/File
Kmart associate, Amber Adams, and Ron Nichols, Kmart store manger, assist customer with Christmas layaways.

It's never too early to start holiday shopping, or so say big retailers like Walmart, Toys "R" Us, and Kmart, which have already rolled out layaway programs to lure in early holiday shoppers. In-store layaway — in which a store sets aside an item that a shopper wants to buy and lets them pay for it in installments before they can take it home — may seem old-fashioned in a world where many people have credit cards, but it's aimed at consumers who don't have the cash for big purchases or don't want to run up their credit card bills.

But even if a shopper does have the cash or credit to buy right now, layaway may seem like a good way to stick to a budget: it means spreading big holiday spending out over several months without the interest of a credit card. However, there are some downsides to layaway to consider before signing up — including hidden fees and the potential for missed deals.

Even Free Layaway Comes at a Cost

First of all, most retailers don't offer layaway year-round, Kmart being a major exception. But many stores do offer layaway programs for the holiday season, starting as early as September. Right now, several big names in retail have begun their layaway programs, including WalmartToys "R" UsSears, and Kmart, with more joining the ranks as the holiday season approaches.

With the economy still in a crunch, the number of stores with layaway options is increasing, and many are offering enticing terms. But shoppers still need to pay attention to the fine print of any layaway program before signing up. This year, many layaway programs won't charge a fee (and if they do, it's likely to be in the $5 range), but don't be fooled by the signs or advertisements proclaiming "free layaway," as there are caveats to both in-store and online layaway.

Terms vary by retailer, but often programs will only allow shoppers to put certain items — or items above a certain price point — on layaway. Shoppers will also be expected to make regular payments on these goods, and most stores ask for a down payment. Missing a payment, deciding you don't want an item, or failing to pick it up on time will likely result in a cancellation fee ranging from $10 to $15, though shoppers should get the rest of their payments back in cash or store credit.

For example, Walmart layaway lets shoppers put aside "electronics, automotive electronics, toys, infant toys, select sporting goods, small appliances, furniture & infant furniture," so long as an item's value is at least $15 (and $50 for the total purchase). The Walmart layaway plan also requires shoppers to pay $10 or 10% (whichever is higher) up-front as a down payment. Shoppers then have to pay their balance in full and pick up purchases by December 15 or the order will be considered canceled and result in a $10 cancellation fee. If a shopper decides to cancel an order for any reason, he will be refunded what he paid thus far, minus the cancellation fee.

Only Use Layaway for Hot, Must-Have Items

Despite any potential benefits, savings-conscious shoppers should be a little wary of layaway; many programs typically don't allow for price adjustments if an item goes on sale after a shopper has put it on layaway. Before you sign up, be sure to ask what happens if the store itself discounts the item later, or if you find a competitor with a better price. Walmart, for example, will price-match competitor ads for layaway items at the point of registering them, but not after the fact.

If a store's layaway program doesn't include price adjustment for sales, then you should consider whether the convenience of securing the item now and paying over time without a credit card is worth missing out on potential future savings. Some super hot, must-have toys, for example, might be worth putting on layaway if they're at risk of selling out before sales hit (and if your child is likely to throw a tantrum on Christmas morning without them). However, if you're considering purchasing anything that will see steep discounts on Black Friday — like TVslaptops, and even Apple products — then layaway may cause you to miss out on hundreds of dollars worth of savings.

Layaway Is Better Than a Credit Card, But Bad for Deal Shopping

While layaway programs don't involve accruing interest charges the way credit card purchases do, shoppers should always be fully aware of the terms of a store's layaway policy. In some cases, missing a payment or canceling your layaway commitment could turn into a real money sink. That said, even if you do wind up having to walk away from your layaway purchase, it won't impact your credit history like missing a credit card payment would.

Ultimately though, if you don't need the layaway option, then savvy shoppers would be better served skipping the hyped-up holiday commercials and opt for patience; unless an item is at risk of selling out, then there's a good chance that you'll find it on the shelves with at least some sort of discount before Christmas Day.

Readers, what have been your layaway experiences in the past? Do you think it's a useful store program, or is it outdated and costly? Tell us in the comments below.

And if you're really excited for Black Friday deals, consider subscribing to the DealNews Select Newsletter to get a daily recap of all our deals; you never know when a Black Friday price will be released! You can also download the DealNews app, check out the latest Black Friday ads, or readmore buying advice.

Elizabeth Harper is a contributor to Dealnews.com, where this article first appeared: http://dealnews.com/features/Holiday-Layaway-May-Cause-Shoppers-to-Miss-Out-on-Deal-Savings/862389.html

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Holiday layaway 101: Don't sacrifice savings for convenience
Read this article in
https://www.csmonitor.com/Business/Saving-Money/2014/1030/Holiday-layaway-101-Don-t-sacrifice-savings-for-convenience
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe