People who end up maxing out their credit cards, racking up interest and defaulting on payments can find themselves in a frighteningly far-reaching predicament. Not only are they in debt, stressed out, and paying more for what they buy than they ever intended, but they may find themselves forever locked out of buying a house, starting a business or owning a car.
Credit ratings have gone from a nebulous issue of reputation among neighbors and business associates to actual numbers, widely reported and sticky as gum, that can stand in the way of a loan forever. For people who either desperately want to avoid bad credit or find themselves unable to convince anyone to give them credit anymore, layaway can be ideal. It's not credit, so should you miss a payment or have to cancel your contract, it has no bearing on your credit score (unless you put the installments on a credit card). Ideally, you'll make your payments using debit, which won't come back to bite you next month or next year (or next decade).
The downside of this type of planned purchasing? Seasonal sales. If you're online to do your holiday or back-to-school shopping, making purchases two months in advance may leave you out in the cold when it comes to special promotions. Find out if the store will honor future promotional pricing, and if not, decide whether the benefits of layaway are worth the risk of possibly paying a little more.
If the other option is the evil pleasure of the swipe, you may just want to risk it.
More Great Links
- Conger, Cristen. "Are layaway plans or credit cards better for saving money?" HowStuffWorks. (Sept. 26, 2011) https://money.howstuffworks.com/personal-finance/budgeting/layaway-plan1.htm
- How does Kmart layaway work? Kmart. (Sept. 26, 2011) http://www.kmart.com/shc/s/dap_10151_10104_DAP_Kmart+Layaway?sid=KSx20070515x00001a&psid=42x2933551#tab2
- Ladika, Susan. "Online layaway: Old-fashioned payment system gets new digital life." CreditCards. May 17, 2011. (Sept. 26, 2011) http://www.creditcards.com/credit-card-news/online-layaway-plans-1273.php
- Layaway: Another Way to Buy. FTC Consumer Alert. (Sept. 26, 2011) http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt173.shtm
- Merzer, Martin. "Toys R Us joins retailers offering layaway plans." CreditCards. Oct. 21, 2009. (Sept. 26, 2011) http://www.creditcards.com/credit-card-news/toys-r-us-joins-layaway-plan-1273.php
- Sears and Kmart Offer Enhanced Online Layaway Options to Ease Back-to-Campus Spending. PR Newswire. Aug. 23, 2011. (Sept. 26, 2011) http://www.prnewswire.com/news-releases/sears-and-kmart-offer-enhanced-online-layaway-options-to-ease-back-to-campus-spending-128247528.html
- Sears layaway overview. Sears. (Sept. 26, 2011) http://www.sears.com/sears-layaway/dap-100000000168006#tab2
- Then and Now: Prices. Michigan Department of Natural Resources. (Sept. 29, 2011). http://www.michigan.gov/dnr/0,1607,7-153-54463_19268_20778-52530--,00.html
HowStuffWorks talks to financial experts to find out the best ways to save money every day. And none of their advice includes giving up Starbucks.