While watching football the last few weekends I have noticed quite a few commercials pushing layaway programs for the Christmas shopping season. Wal-Mart, Target, Sears, Best Buy, and other stores have all brought back the program after a few years of hiatus. What is my opinion of layaway? Well it depends what kind of program it is.
Layaway actually dates back before the invention of the credit card, during the Great Depression. It is essentially a payment plan where you find something that you would like to purchase and then you make monthly or bi-weekly payments to the store until it is paid for in full. The difference between this and a credit card or other financing options is that you do not get to take the item home with you until it is paid for in full.
So is layaway a viable option? Well it can be if certain criteria are met. The first is that there cannot be a lot of fees involved. I know most stores might have a $5 dollar convenience charges and that’s ok, but if the fees becomes greater than $10 then you have to seriously consider these fees as essentially interest and add it in to the overall cost of the purchase. Next you have budget for the purchase. Even if you are paying for the purchase over a two to three month period you still have to budget. Layaway is a great way to spend more than you were planning on so create a budget first and stick to it. Your plan can not just simply be to come up with money when the time comes to make the next payment. Finally, if for whatever reason you cannot make the monthly payment, you need to get all of your money back minus a service charge. If your money is non-refundable avoid layaway at all costs.
As you can probably tell I am not a huge fan of layaway. To me it just smells like payments. But with that being said I do not think it is necessarily a bad thing as long as you meet the three criteria above. Ultimately I would prefer if you saved up the money yourself and paid for cash the gift. But if you have a plan to actually have the money to buy the item in layaway and can avoid the high fees, layaway can be a viable option this Christmas season.
So what is your opinion of layaway? I would love to hear it.