Free layaway: Is it a good deal?

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Is free layaway actually a good deal?In the next few weeks, stores and online retailers will be bombarded with holiday shoppers. In an effort to encourage spending, some stores are offering free layaway programs.

Toys ‘R’ Us, for example, boasts, “No upfront fees!” on their website. And in August, Walmart introduced “free layaway with no opening fee,” according to a press release.

Despite the hoopla, the savings are modest — both retailers are waiving an “upfront fee” of a whopping five dollars.

But hey, a penny saved is a penny earned, right?  So maybe free layaway is a good deal. But I probably don’t have to tell you, some exclusions and limitations may apply.

Certified credit counselor Thomas Nitzsche warns consumers to “really pay attention to the fine print” if they plan to use layaway.

“If it’s a small item, the store might not allow it,” Nitzsche says. “If it’s a large item in a certain category, they might not allow it. If it’s a Black Friday item, they might not allow it.”

And at both Walmart and Toys ‘R’ Us, a down payment and cancellation fee still apply.

As a personal finance writer, I can’t help but feel wary about the very concept of layaway. Nitzsche, who practices at ClearPoint Credit Counseling Solutions, validates my wariness.

“People do the same thing with layaway they do with a credit card,” he says. “They buy things they otherwise wouldn’t have bought. It’s a helpful tool for some; I, personally, really encourage people to set money aside so they can pay it all off.”

Free or not, layaway is aimed at consumers on a tight budget. Yet, people on a tight budget are probably most susceptible to cancellation fees. Is free layaway a good deal? If you’re planning on doing it anyway and consider saving five bucks a good deal, then sure. But if you’re susceptible to overspending (and retailers are hoping you are), is five bucks worth the risk?

A better option than layaway is to simply save until, y’know, you can actually afford the desired item.

But if you’re going to use layaway, I’ll reiterate Nitzsche’s two pieces of straightforward advice: Don’t overspend, and read the fine print.

What do you think? Do you use layaway? If so, why, and what’s been your experience?

(Photo: Flickr user Random Retail)

{ 5 comments, please add your thoughts now! }

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5 Responses to “Free layaway: Is it a good deal?”

  1. If I had to put something on layaway I wouldn’t be able yo afford it so I think it is a bad idea.

  2. David S says:

    I wouldn’t use it, however there is a potential advantage to layaway and that is if you can purchase the item right now, but want to hold onto the money to earn interest (albeit small in today’s atmosphere) you can put it on layaway and when it comes time purchase it.

    Plus the store gets to hide it from the kids instead of you.

  3. Walmart now charges a $10 cancellation fee if you don’t follow through completely on your layaway commitment, which means pay in full by Dec 13.

    Instead of making an interest free loan to a retailer by giving it your money to hold, just make “payments” to a trusted friend. Quicker, simpler, and cheaper!

  4. Bernice says:

    Generally I don’t use layaway but if i do its because something is on sale and the sale ends before I have all the money for it. So i put it on layaway and get the sale price and pay it off when i get paid next.

    @Kurt Should walmart or any other retailer not charge a cancellation? I think they should. You cost them money by holding your stuff, taking it off the shelves for someone else to buy, storing your info in case you do come pay it off etc. And you hit the nail in the head when you said “10 cancel fee if you dont follow through on your layaway commitment” Exactly. You made a commitment to buy something so if you go back on that you should be punished.

  5. Kristin Wong says:

    David and Bernice make decent points for layaway’s pros. Maybe that’s why my mom decided to use it in the 80s, when interest rates were much higher. She bought me a Casio keyboard. I still have it!

    Still don’t think I’d use it, either. I like Kurt’s tip!

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