RICHMOND, VA (WWBT) - Money is tight and retailers are already working to pack their stores with people willing to spend. The layaway plan is making a comeback, but there are pitfalls to avoid.
A downside to layaway are transaction, or cancellation, fees that could cost you more if you don't pay attention to the fine print in the contract and stay committed to the payment schedule.
Layaway plans worked so well last year, big name stores, and even online retailers, are pumping layaway promotions again.
Consumers generally see it as a way to buy items you can't afford all at once and avoid high interest rates associated with credit card purchases. Also, there are no negative hits on your credit report.
"Layaway, you actually bundle those purchases. You put them in layaway. There's normally a small service fee that's involved. Then, you make payments incrementally over weeks or months and you can't take the items out until the actual purchase is paid off in full," said Joan Couglin from the Better Business Bureau.
But, layaway isn't for everyone. In fact, some say it's for people who are financially organized, because you could end up paying more.
If you change your mind about your layaway purchase, you can lose your service fee, which is usually $5 or $10, and you can also get hit with a cancellation fee.
"You want to make sure you understand and know when your payments are due, what the service plan fees are that's involved. What if your payment is late, will they put them back on inventory," said Couglin.
The National Retail Federation says 1 in 7 consumers is already at 80% of their credit limit. Credit isn't as easy to get as it once was to get.
Money experts say don't forget there's another option, and that's cash. Shopping with cash is a good way to avoid overspending. The disadvantage, though, is you don't get the same consumer protections you get, when shopping with a credit card.
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