Consider this – 6 percent of us are still paying off credit card bills from last holiday season. That may be why more people are putting items on layaway instead. That's when the store puts your items aside and you pay for them over time. But unlike the old days, stores today are charging layaway fees and there are plenty of rules.
Three-year-old Jazzin is expecting a big haul from Santa this year and her mother is making sure she is not disappointed. Marsha Mitchell bought $200 worth of Jazzin's favorite toys at Kmart. However, since she could not pay for all of it up front, she put it on layaway.
"I can just keep putting $20 in and by the time Christmas comes, I'll have all my presents," she says.
Layaway got lots of folks through the Great Depression. Now many retailers are bringing it back.
This is how it works. You pay a deposit on the stuff you want to buy. The store sets it aside and you make regular payments. Once it is paid off, you take your merchandise home free and clear.
"It's a good thing to learn how to not buy stuff you can't afford, and layaway makes sure that you don't actually walk home with anything until you have saved and spent the money on that item and you've paid for all of it," explains Michal Strahilevitz, marketing professor at Golden Gate University.
She says waiting for your merchandise isn't so bad.
"You look forward to the day that you make your last payment and you walk home with it and it's yours and you don't owe anybody anything," says Strahilevitz. "That is your sweater, your television set."
Stores offering layaway include Kmart, Sears, Marshalls, TJ Mazz, and Burlington Coat Factory. Toys R Us offers it only for the holidays. Retailers like Best Buy, Apple and Home Depot offer layaway plans online through eLayaway.com. But there are some things to watch out for.
"Every store that has layaway also has a layaway policy, and they have to have it in writing," says Strahilevitz.
Most retailers charge a non-refundable service fee of $5 or $10 to set up the layaway account. If you cancel your order, expect to pay a cancelation fee, usually another $5 or $10. The eLayaway site charges up to $25 depending on your purchase amount.
If you default on your payments, your items go back on the shelf. Most stores will refund any money you paid up to that point minus the cancelation and service fees.
Bottom line, make sure you read the terms.
"And say, 'Wow, does this make sense for me?' It's going to vary from retailer to retailer, so it's not this blanket 'Hey, it's always a good idea, hey, it's always a bad idea,'" says Strahilevitz. "It really depends, just like every other contract, on the terms."
Mitchell says it sure beats racking up debt.
"So I just won't be broke on December 2."