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Daily Q&A: What's up with layaway offers?

I hear layaway offers from retailers are becoming popular again. What can you tell me about how layaway is working these days, especially with the tight economy?

Yes, layaway appears to be making a comeback, and in large part because of the tough economic times. With consumers avoiding credit cards more than in the past, retailers are offering layaway as an alternative.

Here is an explanation of layaway and some tips found in the current issue of ShopSmart ( shopsmartmag.org), from the publisher of Consumer Reports.

How does it work?

• The basics remain the same: You pick a big-ticket item (or a bunch of smaller-ticket items), put a bit of money down, make payments for several weeks or up to a year until your purchase is paid off, and then take your stuff home.

Why choose layaway?

• You can spread purchases over several paychecks, which is especially helpful for holiday shopping. You can nab hot items before they get snapped up and avoid the crowds vying for the last laughing/crying/break-dancing Elmo. And what better place to hide gifts from prying eyes than the backroom of your favorite store? Plus there's no interest charged.

• • •

What are the drawbacks?

• You might have to pay fees, ranging from just $5 or $10 to as much as $150. Most layaway plans also charge a cancellation fee and some charge service fees of $5 or a small percentage of the merchandise total.

• Some stores honor at least one price adjustment if an item goes on sale. But the adjustment period is usually limited to a couple of weeks or less.

• You will forfeit any funds you could have accumulated by saving the cash in an interest-bearing account until you had enough for your purchase. And if you pay with cash, of course, you don't pay any service fees.

• Like gift cards, layaway payments could go poof if a store goes belly up.

Find more tips at www.shopsmartmag.org/files/The_anti_plastic.pdf.

Question for the Consumer's Edge? Send it to ipenn@sptimes.com or twitter.com/consumers_edge. Questions are answered only in this daily feature.

Daily Q&A: What's up with layaway offers? 11/05/09 [Last modified: Thursday, November 5, 2009 11:00am]
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