The lost art of layaway and your holiday shopping

  • Published
  • By Capt. Benjamin F. Martin
  • 48th Fighter Wing Legal Office
RAF LAKENHEATH, England --  Layaway is making a comeback fit for the digital age. Generations of Americans used store layaway plans as an alternative to credit, or in the absence of available credit, to make purchases a little bit at a time. In preparation for the holidays, birthdays or other special occasions, a shopper could fix the price on a big-ticket item months in advance and slowly pay off the balance, collecting the item as soon as it had been paid for. However, in the last few decades many stores, citing the availability of credit as an alternative to layaway, have removed these programs. Thanks to the internet, layaway is making a comeback. 

Layaway sites offer a similarly styled service to old-fashioned layaway allowing consumers to shop a variety of merchants online and then complete their purchase in monthly installments, only receiving the good after the product has been fully paid for. Layaway offers a consumer many advantages, but also several disadvantages. Additionally, the online programs vary in several key ways to in-store programs that you may have used previously. Here are a few things to think about: 

1. Do you really need this item? This question is foremost for ANY purchase- credit card purchases or layaway plans. If you don't have the money right now to make the purchase, maybe this isn't a wise use of your money. 

2. You don't get your stuff until after it's paid for. Six months down the line when that new computer is finally paid for, it may be already out of date! Additionally, there are many purchases that you may lose interest in after several months waiting to pay off. If you can live without it for six months while it's paid off, maybe you don't really need it. 

3. Know the terms. The benefit of traditional layaway is usually that no interest or service fees are charged. All a store wanted was a down payment, usually around 10 percent of the purchase price, which was applied towards your debt. Now, some layaway sites make their money by charging a transaction fee of 1.9 percent on the initial purchase price. If you plan to pay off your purchase quickly, this transaction fee could end up being higher than the interest you would be charged on a credit card. Do the math. 

4. Find out about minimum payments and payment deadlines. Ask about refunds. What happens if you do not complete your payments? Can you get a cash refund or just a store credit? Is there a service charge? All of these sites will offer different plans, or transactions costs. If you're interested in these services, shop around to find the most reputable site, with the lowest penalties for withdrawing from the transaction or failing to make the payment. 

5. Even online, try to shop with reputable, financially stable merchants. The last thing you want is for a retailer to file for bankruptcy holding your merchandise and your money. You might not see either one again. Also, since these sites are set up to withdraw funds directly from your bank account, you'll need to be extra careful about releasing your information. 

This holiday season, online layaway may be the best way to ensure your loved ones receive the big gifts you've wanted to give. By carefully reviewing the variety of available services and the fine print on these Web sites, you can give yourself the gift of peace of mind.