Stores promote layaway - but is it right for you?

Stores promote layaway - but is it right for you?

CAPE GIRARDEAU, MO (KFVS) - Holiday shopping season is here and you are no doubt seeing more and more advertisements for layaway plans.  They may sound good during tough economic times, but is layaway right for you?

Layaway plans started in the 1920's during the Great Depression. The growing popularity of credit cards -- caused most stores to cancel layaway by the 90's. So it's no surprise that today's recession along with a surge of credit and bank fees have led to a layaway comeback.

"It shows retailers are desperate to spend money when they don't have that much money," said Jack Otter, CBS Analyst.

Wal-Mart, Toys R Us, Kmart, Sears and Best Buy are some of the popular stores where you can now put it on layaway.

"If you don't have the money right now, you can put it in layaway," said Michelle Ford of Tamms, Illinois.

But should you? Here are some things to consider:

First, Fees. There's no such thing as a free layaway. Wal-Mart, for example, charges a $5 fee to enter its program and a down payment of 10 percent of the purchase price.

Some stores will charge up to 20 percent for that down payment.

You should also consider cost of what you're buying.

If the item later goes on sale, the store may not offer a price adjustment... so be prepared to be locked in to whatever price you paid.

Something else to consider; your budget.

"Instead of paying $300-$400 all at one time, you can make small payments up to Christmas. You can give the children a better Christmas," said Kristy Shoemaker or Advance, Missouri.

But be sure to budget carefully to have the money on hand to make the payments so you don't have to deal with cancellation fees.

If you miss a payment most stores can put the item or items back on the shelf. They will return you balance minus that $5 to $10 fee.

The alternative if you can't pay outright is a credit card. Typically though you'll pay a lot more in interest rates that way and this can also lead to overspending.

The bottom line: read the fine print in the store's layaway plan before signing up for an account. And be aware, there are some catches. Some stores only allow you to put certain things in layaway. Wal Mart only allows electronics, jewelry and toys. Most other stores have limitations as to what you can put on layaway.

Also most store plans don't include those Black Friday deals you'll find on November 25.

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