Updated November 30, 2013

Holiday Layaway 2013: 3 Pitfalls of Layaway Plans

Many Americans are taking a cautious, wait-and-see approach to holiday shopping this year. Still recovering from a down economy and the federal government's partial shutdown, not all shoppers are ready to open their wallets without some major deals.

One highly promoted way retailers are trying to get you to overcome any spending hesitation this holiday season is layaway. But do these newly discounted programs count as an actual deal? CreditDonkey.com went to work to find out by carefully examining major retailers’ current offers, and we uncovered the top three pitfalls of layaway in the fine print.

The Lowdown of Popular 2013 Layaway Programs

For the first time, holiday layaway at Walmart is completely free. The offer is good until December 13, 2013. Requirements include:

  • A down payment totaling the greater of either $10 or 10% of your purchase price
  • Final payment and pickup on or before December 13, 2013
  • A $10 cancellation fee
  • Individual items must be at least $15; total purchases must be at least $50

Kmart also has free layaway but under a tighter timeframe. After November 23, 2013, the store’s fee goes back to $5 for an eight-week layaway plan. Requirements include:

  • A down payment totaling the greater of $15 or 10% of your purchase value
  • Final payment due within eight weeks
  • A $10 cancellation fee
  • A minimum $15 purchase

The same company that owns Kmart also owns Sears, but layaway terms at Sears are slightly different. Requirements include:

  • A down payment totaling the greater of $20 or 20% of your purchase value
  • Final payment due with eight weeks
  • A $15 cancellation fee
  • A minimum $20 purchase
  • A $5 service fee for new layaway on an eight-week contract

Toys R Us/Babies R Us is currently running a free layaway program with no upfront fees. Requirements include:

  • A down payment of 10% of your purchase value
  • Final payment and pickup due by December 15, 2013
  • A $10 cancellation fee

With all of these plans, extra restrictions do apply.

Even if the terms of these layaway plans appear promising – particularly the free ones – they do not necessarily swing to your advantage if you’re not paying attention. Avoid what we call the top three pitfalls of layaway.

Layaway Pitfall #1

You Buy More Items to Meet a Store’s Minimum Requirement
Say you go into a store planning just to buy and set aside a small item, or a few small items. But the layaway program’s minimum-purchase requirement tempts you into adding more products to your pile so you can put off making a payment and take advantage of “free” layaway. All you did though is spend money that you could have used to buy better-planned gifts or necessities you’ll need in the meantime.

Layaway Pitfall #2

You Forfeit an Item Because You Didn’t Follow the Terms
Layaway is set up with certain rules. If you miss one of your payments or fail to get your layaway out in time, you could lose your item altogether. This means not only could you be out some money, but you also have nothing to show for it.

Layaway Pitfall #3

You Give Up a Chance at Deep Discounts to Meet a Free Layaway Offer
Retailers want your money as soon as possible. Their free layaway plans are a way to get you and other consumers to start early. But if you wait to shop, you may find some of the best deals of the season, when retailers start worrying about freeing up their inventory. If they lock you into a layaway plan, they are usually not willing to adjust the price of your items if they go on sale later. In a way, you’re gambling that the price won’t go down if you put an item on layaway.

Even if you don’t want to part with your money now to pay in cash, you do have another option besides layaway. By seeing if you qualify for a 0% introductory credit card, you could put off the full amount of your holiday spending for a significant amount of time, giving you a breather for budgeting and saving money while not missing out on the holiday shopping season. The key, though, is to make sure you can make the payments when the time comes.

Better yet, be smart with your money. Budget for the type of holiday gifts you can afford and stick to your plan. This way you will not leave yourself in debt for the New Year.

Lori D is a contributing writer at CreditDonkey, a credit card comparison and reviews website. Write to Lori D at lori@creditdonkey.com. Our data-driven analysis has been recognized by major news outlets across the country and has helped families make savvy decisions. (read more)

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