Can I Use Layaway for My Holiday Shopping?

T-Minus 21 days before Christmas and the time will fly by.  If you find yourself struggling with a way to pay for presents then perhaps layaway is a good option for you.  Layaway lets you pay for the merchandise every week for up to 3 months. You don’t take ownership until you pay for the merchandise in full. This service is particularly attractive to those that don’t have credit, don’t want to use their credit cards, or don’t have the funds to pay in full. Every year merchandise for the holiday season appears earlier in the stores and retailers are announcing their layaway programs even earlier this year.

Layaway Program Comparisons

Several stores have already announced their layaway programs:  Kmart, Sears, Toys R Us and Walmart.

Kmart, a division of Sears, did not charge fees to open a layaway account through November 17 and won’t charge interest. Previously, they charged $5 for a layaway for 8 weeks and $10 for 12 weeks. They have had layaway since the 1960’s.

Toys R Us did not charge a service fee for layaway orders from September 4 to October 31.  As of November 1, a $5 service fee will be charged.  Toys R Us has offered layaway since 2009, but it wasn’t until 2011 that all items could be placed in layaway and most items at Babies 4 Us.

Walmart’s layaway program fee was lowered from $15 to $5 from September 15 to December 14. This is a month longer than last year and will include more than just toys and electronics. Those that pay off their layaway will get a full refund of the $5 fee in the form of a Walmart gift card. Last year was the first year they offered layaway since 2006.

BBB Advice

When buying items on layaway, the BBB advises consumers to get everything in writing and offers the following checklist of questions to ask:

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How much time do I have to pay off the item?

When are the payments due?

How much do I have to put down?

Are there any storage or service plan fees?

What happens if I miss a payment? Are there penalties? Does the item return to inventory?

Can I get a refund or store credit if I no longer want the item after making a few payments?

What happens if the item goes on sale after I’ve put it on layaway?

Does the retailer or third-party layaway service have a good BBB rating?

To take advantage of these layaway programs, you have to purchase early before the holiday season really begins, except for Walmart.  The sales on merchandise haven’t begun and the hot toys aren’t identified yet.  If you know what you want to buy and can made the weekly payments, this is much cheaper than paying interest on your credit card or a payday loan.

Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.