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Does layaway make the holidays more affordable? In most cases, NO! You hear the ads on TV, see the signs at the stores and think to yourself,"What a great way to afford Christmas gifts!" But the truth is: if you were to make payments to your savings account rather than a layaway account you would save yourself more money in the end.

Layaway is a way for consumers to make installment payments on an item to avoid paying the entire cost up front. However, the item is not received by the consumer until it is paid in full, including any associated fees. Layaway plans are meant to sound alluring to consumers…how else would the stores convince you to pay them a service fee?

To save yourself from becoming another Service Fee Servant, be sure to read the fine print on the layaway plans. Most stores that offer layaway programs charge a service fee just for using the layaway service and charge cancellation fees if you opt out of the items before they are paid off; not to mention the list of restrictions made by each store for the items you can place on layaway. "Applies only to toys, electronics…excludes sporting goods, home/kitchen appliances…etc.”

Take, for instance, a few policies of some major retailers:

  • Wal-Mart requires a minimum down payment of 10% at time of layaway + $5 service fee. The total purchase must be greater than $50 and each item placed on layaway must cost more than $15. Online purchases do not qualify. Any layaway orders not paid for or picked up by December 16, 2011 will be cancelled. Any payments made will be refunded minus a $10 cancellation fee and $5 service fee.
  • Kmart's layaway plan has an even higher cancellation fee of $15 and requires the consumer to make biweekly payments as stipulated in the 8-week contract that is entered into when the layaway order is placed.
  • Toys R Us has the highest down payment requirement of the three retailers listed here. It's 20% + $5 service fee. Their policy also states that if at least 50% of the total layaway purchase is not paid within 45 days the consumer's order will be cancelled, and a $10 fee will be assessed (although it is higher in some states- see local store for more information).

Instead of using a layaway plan this holiday season, save yourself the hassle and money by implementing a few easy money saving strategies:

  • Make a conscious effort to track your spending and make adjustments where you can.
  • Start planning ahead. It's easy to get busy and just grab a meal on the go, so think ahead and avoid the costs of dining out by bringing a lunch to work or making dinner at home (you'll enjoy it more when you do go out, and your wallet will thank you).
  • Look into savings options at your bank. Many financial institutions now offer a "rounding up" program on your checking account and will deposit the "change" into your savings account. This is a great way to start a holiday shopping fund without the effort.
  • You can even set aside the money you save from clipping coupons and start a "Christmas Fund." When Black Friday comes around, take your stash and benefit from the great sales. You'll enjoy great deals minus the service fees!!

This has been a guest post by Lacy from Brainerd, MN
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