Considering a Layaway Purchase? Read This “With so many Americans still struggling financially and reeling under credit-card debt, layaway is likely to be an even more attractive alternative to pay for gifts this holiday season. If you’re unfamiliar with the layaway process, here’s how it works.” [Consumer Reports Money]
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I don’t get the appeal of this at all… Why not just wait 30-90 days and buy the thing, minus the fees. At least buying on credit, you get the item now.
Seriously, just learn to save. Oh wait, forgot, this is America. We LOVE paying fees for NOTHING.
Back in the dark days of history when I was a poor student layaway was free. With all the service fees it isn’t quite the great deal it used to be.
It used to be a useful tool if you really wanted to grab something before they were all gone but didn’t have all the money up front.
Say you put a $100 item on layaway for 90 days and pay a $10 service charge, or 10% of the cost. This is the equivalent of paying 40% interest on the item. Instead, you use a credit card at 20% interst to pay for the $100 item and pay it off in 90 days. Total interest charges = $5. The break even point is $200. It’s more if your interest rate is less.
Moral: unless it’s something that’s really expensive or you can’t trust yourself to pay off the balance on your credit card, it’s a better deal to pay with plastic.
@Oranges w/ Cheese wants it to be winter already:
@pecan 3.14159265: I guess I can see people using it for that. I’m crazy enough to not buy stuff if I don’t have the money, though.
I guess if it’s really only a $5-$10 fee, it wouldn’t be crazy to use it for a large item, anyway… Cheaper than charging it if you’re going to pay interest.
@catastrophegirl: I would imagine they’d have a problem with people putting computers on layaway, getting it out 3 months later, returning it and getting a newer, cheaper model, leaving them with the out-of-date stock. Technology changes too fast I guess.
@catastrophegirl: The down payment and penalties for not completing a transaction would have to be massive, they depreciate too quickly. It would be a bad idea for the buyer anyways.
If you need to take 3 months to get enough money, save it in the mattress and you will get a better computer.
@catastrophegirl: Who goes to K-mart to buy a computer????
@morganlh85: @catastrophegirl: I haven’t seen a Kmart selling any kind of computers in years so I doubt that is an issue.
@Kamidari: I’m like you, I tend not to buy things when I don’t have cash in hand. Therefore I really can do without credit cards and there are few occasions where they would make things easier for me. Layaway, however, is a godsend.
I wear a hard-to-fit style and size, for example, and it’s one that tends to sell out quickly. If I can shop while things are available (which is far into the season before they’ll be needed), and lay them by while I make payments on them, I am assured of having clothes that fit when the time comes to wear them.
Layaway also helps me control my spending. If I had a credit card, I might be more susceptible to the “I have to have it right now” demon. Layaway gives me an incentive to ask myself whether I really need something and whether it’s worth waiting for.