Tuesday Tips: Layaway Plans

I hadn't heard the term "layaway" since I was a kid. But then Kmart recently decided to bring back this payment option for Christmas. So if you walk into Kmart and see that TV you've been pining for, you can ask the store to hold it for you while you make weekly payments until you completely pay it off and get to take it home. The store will ask for a fee to hold the item for you. The store says 3.2 million shoppers used its layaway plan last year. "It's a nice idea if you're really trying to keep your household budget in line and not subject yourself to willy nilly spending," says Tod Marks, a senior editor with Consumer Reports magazine. Marshalls and T.J. Maxx offer layaway plans, too. If you're planning on using this payment option, here are a few tips:

Tip #1: Get it in writing. The Federal Trade Commission says you should have the terms of the layaway plan in writing and include things like how much time you have to pay for the merchandise, when the payments are due, the minimum payment required and fees for using the plan.

Tip #2: Don't miss a payment or your TV could end up going back to the sales floor. Find out what your store does if you're late with a payment or miss it altogether. Some might give you a few days of leeway.

Tip #3: Ask anybody and everybody if they offer layaway. Usually it's the big box stores that offer these payment options but smaller independent stores may have their own plans as well.

Tip #4: Make sure you know what happens if you decide you don't want that gigantic TV afterall. Some stores give you back all your money and others charge a non-refundable service fee to put the stuff back on the sales floor. Others may offer a store credit for the amount you paid.

Tip #5: Don't go crazy with layaway. You will want to be able to keep up with payments and if you have too many layaway plans going at the same time, it might become overwhelming. "You want to be able to keep track of all the items," says Marks, who also writes the Tightwad Tod blog for Consumer Reports.

Tip #6: Don't set yourself up for disaster. Make sure you're giving yourself enough time to pay off the item. If the weekly payments are too big, then you may be forced to give it up. Marks says if you're buying a big-ticket item for Christmas, consider putting it on layaway this week to be able to handle the weekly payments.

Tip #7: Layaway is not just for the brick and mortar stores. eLayaway is a payment option with a select number of online stores including Apple, Adidas and The Gap. The site charges a 1.9 percent service fee and will send you the items you ordered as soon as you finish paying it off.

Have you ever used a layaway plan? What tips do you have for using layaway?

By Tania Anderson |  November 4, 2008; 12:00 AM ET Tuesday Tips
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I remeber using layaway when I was in high school in the early 90s. I think it was at Kmart. I think back on those days and remember how poor I was, that my mom and I couldn't afford a $75 winter coat, so I had to put it on layaway. It was before I could qualify for credit. I would rather have a credit card and skip the humiliation of broadcasting "I can't afford this, but thanks for providing a way for me to publically demonstrate that every week as I roll up my pennies to pay for this."

Posted by: changingfaces | November 5, 2008 6:39 AM

Couldn't you just, oh, I don't know, set aside the money for that big screen tv and avoid the service fee?

Posted by: milesdy | November 5, 2008 9:29 AM

Our Kmart has always had layaway. The only problem with layaway is a store cannot take the item off inventory until it is delivered as a FINAL sale.

This is a great alternative to credit cards as it encourages cash and budgeting.

And NO January hangover.

Posted by: dnfsmth | November 5, 2008 4:36 PM

Also be sure to get a LIST of the exact items you are putting on layaway and even take pictures with your cell phone if you can. Some stores mix things up and some are just plain deceptive.

I gave up on layaway the year I bought my 13 year old SON a mountain bike for nearly $200 and paid it off only to have Kmart wheel out a small PINK GIRLS bike with training wheels THAT COST ONLY $59. To add insult to injury, the bike I had bought had gone on sale since I put it on layaway and Kmart then tried to refund me only the recent sale price of the bike - HALF what I paid - while I had the receipt right there in my hand and hadnt even left the register (this was minutes after getting the wrong bike).

My sister got her kids a hard-to-find video game unit (the hot item that year), only to have it mysteriously "disappear" (they said they "couldnt find it") when she paid and went to pick it up. So never wait until the last minute to pick up your stuff - in case it isnt there.

Posted by: tunatofu | November 5, 2008 5:34 PM

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