eLayaway

Layaway makes a comeback for the holidays

Many consumers are trying to do their holiday shopping this year without using a credit card. Good move.

One alternative is layaway, which has made a comeback during this period of financial stress.

Layaway plans let consumers buy products and services without using credit or paying the full price immediately.

When you use layaway, you typically put down a deposit – usually a percentage of the purchase price – and pay over time. The retailer holds the merchandise for you in reserve. You take possession only when you've paid for the item in full.

Using layaway can teach delayed gratification and keep you from buying impulsively.

"It creates a good discipline around budgeting and saving," said Ted Beck, president and chief executive of the National Endowment for Financial Education. "A lot of good financial education is really making sure you buy what you can afford and setting a goal."

Before you sign up for layaway, here's what you should know:

• Get the terms of the plan in writing. Know how much you'll need for a down payment, how much each payment will be and how much time you have to pay for the merchandise.

"If you buy $200 worth of presents for your children, make sure you can commit to paying off $50 each week," Beck said.

Also understand when your payments are due and possible charges for using the plan, such as a service fee.

Ask if there's a fee or a penalty for missed or late payments. Will your contract be canceled? Will the merchandise be returned to inventory?

• What's the refund policy? If you decide you don't want the merchandise after you've made some or all the payments, can you get a refund?

"Retailers' policies may differ," according to the Federal Trade Commission's consumer tips on layaway plans. "Some give you all your money back, others may charge a non-refundable service fee. Still others may offer a merchant credit for the amount you paid."

• What happens if the item goes on sale after you've put it on layaway?

At Sears and Kmart, both of which are owned by Sears Holdings Corp., layaway customers get one price adjustment on advertised items within seven days of the initial layaway date.

At Sears, the minimum down payment on layaway is $15 or 20 percent of the total order, whichever is greater, and at Kmart, it's $15 or 10 percent of your total order.

Layaway purchase plans aren't limited to brick-and-mortar stores. Both Sears and Kmart have online layaway plans, for example.

There are also independent Web sites, such as eLayaway.com, that operate like an online shopping mart.

The Web sites have hundreds of merchants and online retailers selling name brand items. Some sites require electronic debiting from your checking account, while others require that you pay by check or money order through snail mail.

Still others allow you to pay with credit or debit cards, or use online payment services.

Once you've paid the balance, the online layaway service pays the merchant, and the merchant sends you the product.

If you decide to use layaway, save all records of your plan. That includes the contract and all payments that you make.

And remember the most valuable gift that you can give yourself by using a layaway plan: peace of mind knowing that you won't face holiday credit card bills in the new year.