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The truth about layaway may surprise you

Updated: November 23, 2011 10:01PM

Layaway seems to be making a big comeback this year. Walmart, Sears, and Toys R Us all offer layaway. But the truth is for a lot of stores, it never went away. It just seems that more people are looking for different payment options for their holiday shopping.

The question is whether layaway is beneficial to you. Do you want to pay a store to hold on to your merchandise? And will it keep you in your budget?

Here are some questions to ask before signing up for layaway: How much time do I have to pay off the item? When are the payments due? How much do I have to put down?

There is no such thing as free layaway. The fees may not sound high, but because of the short duration of layaway programs, they can exceed the interest charges on a credit card. For example, If you pay a $5 layaway fee and $10 down payment on a $100 item held for eight weeks that’s the equivalent of 44 percent APR on a card.

What happens if I miss a payment? If you skip a payment, many stores will cancel the layaway, and return the item to the shelves. They’ll return your balance, typically minus a cancellation fee.

Can I get a refund or store credit if I no longer want the item after making a few payments? Refund and exchange issues are the No. 1 complaint about layaway programs. Some may return only a sale price even if the item was full price under the layaway.

What happens if the item goes on sale? If you sign up for an eight-week layaway plan this weekend, you’ll pay whatever price the store is charging right now.

Shopper’s tip: If you can do it, just pay cash, so that you don’t wind up with the January shopping hangover.

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