So You Need Cash For Holiday Gifts? Are Layaway Plans The Answer?


During the holiday season many big department stores and retailers like Walmart, Sears, Burlington Coat factory and Kmart did doing everything to get you to enter layaway plan deals (more on those later) so you could secure those holiday gifts for just a fraction of the cost as an advance deposit.

But now the holidays have arrived, those layaway deals have to be paid for, and for most of us, there is a sudden need for the cash to pay for those deals, let alone to make the holidays super special. So let’s have a look at exactly what you should do if you are tempted or have entered a layaway plan, and what you can do to raise the cash to pay for your holiday spending


What Is A “LayAway” Plan?


A Layaway plan is a popular way of enabling a consumer to buy a product that they cannot afford, without the need for credit. All that is needed is a deposit to be paid (10% or less is common, depending upon the value of the item), and then the consumers can make installment payments. The retailer holds or reserves the particular item. As and when the installment plan is honored, the goods can then be shipped.

So it seems like a great way of getting that brand new shiny big-screen TV, or gift for that special person. However, the Federal Trade Commission (FTC), the nation’s consumer protection agency, says it’s important to ask questions about how particular layaway plans work so that you fully aware of the possible consequences.

The FTC advises that you should use caution when considering using a holiday layaway plan because even though you are not paying interest on the purchase price, there are still charges and fees that can be applied that will mean you could end up paying more than you were executing. The FTC advises that consumers need to make themselves aware of all of the terms of a layaway agreement, and to look out for certain details, including:

Are the sales prices fixed or can they change?

Are the installment payment amounts fixed or can they change?

What is the length of the layaway payment period?

What are the fees (holding fees, service fees, cancellation fees, and are they refundable?

What happens if you change your mind about making the purchase?

The Federal Trade Commission Act (FTCA) prohibits business practices that are unfair or deceptive. The federal Truth in Lending Act can also apply to your layaway plan if the retailer required you to agree, in writing, to make all payments until the product is paid in full. If that is the case, the retailers may have to make certain disclosures regarding costs and charges that apply to your particular layaway plan. If you believe that certain terms were not disclosed to you in violation of the Act, the FTC has an online complaints procedure that has an online complaints assistant procedure that helps making a complaint understandable and quick to do.


Should You Enter A Layaway Plan?


You will, therefore, need to exercise caution before you consider funding  your holiday purchase by using a layaway plan ( rather than like getting a payday loan from, which is a quick and easy way of getting a small dollar advance against your next paycheck) and you must take precautions so that you can budget more accurately).

Here are a few matters that you should take into account before considering taking the layaway option:

1. Most stores charge $5-10 service fee, and cancellation fees can be as much as $25

2. What you save not getting credit, you may lose on a higher purchase price – the Black Friday special savings seem to now run for two weeks before the date itself, and there are major discounted deals to be captured, plus prices fluctuate wildly during the Christmas shopping season. That’s leaving aside the Cyber Monday offers that are available online on the first Monday after the Thanksgiving holiday in the United States. Most layaway prices make no allowance for price reductions if the price of the item goes down at a later date, and you’ll miss out on the best bargains and a chance to spend less on your shopping, something you should try to do all year round.

3.  Layaways often tempt shoppers to buy more than they can truly afford, and it is very easy to end up overspending because everything seems that much more attainable.


What Can You Do To Make Sure You Have Cash For The Holidays?


Make a budget for your spending, and stick to it. Always make a list -  no matter what – here is a great tip from money expert Clark Howard, who advises shoppers to write down on a sheet of paper all the names of your gift recipients. Then work out your affordable total budget, and divide that budget among everyone on your list.

“You carry that list with you, and then as you buy a gift for somebody, if it’s more or less the same as what you had on your budget, you record that,” he says. If you overspend on one person, subtract that amount of overspend from the column of another person on your list — and vice versa if you underspend on a person – that way you can stay within your fixed budget.

Finally – we are all tempted to overspend on that special item for a loved one –after all, we are only human. So if you do have that oh-too-human impulse, don’t panic. It is the season for giving, and that means more than just material things.

Give others your time instead. Ask your loved ones to join you in volunteering to help your community. The feeling of helping others in need will be a bonding experience for your family and give you all a holiday feel-good factor that you will never forget.