Layaway may seem like a throwback to the last century. But for consumers who don't have access to a credit card, buying gifts through layaway can be a money-saving alternative to short-term installment loans.
Layaway programs allow buyers to space out payments on an item over time, without using a credit card. A buyer claims an item only after the full purchase price has been paid. Some consumers prefer layaway to credit because they are charged no interest on the payments. When they're buying a gift that won't be given for some time, it's not so important to take the item home immediately.
Large retailers like Wal-Mart, Toys R Us, Kmart and Sears began offering seasonal layaway programs as early as August. The programs vary, and it's important for consumers to read layaway contracts and understand the terms and any fees before signing the contract.
Some retailers allow customers to buy items available on their websites, while others allow layaway only on items in stock at the store. Some allow customers to use coupons, but only on items that aren't already on sale. There may be fees to open an account or to terminate it.
When placing items on layaway, Better Business Bureau recommends that you ask the following questions:
• 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?
• Is there a fee if I decide I no longer want the item?
• 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?
You can find a retailer's BBB rating or read a BBB Business Review by going online to www.bbb.org or by calling 573-886-8965.
Sean Spence is the Mid-Missouri regional director for Better Business Bureau.