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Layaway Plans Popular Again But Might Not Be Worth It

Written by Money Saver Suzanne McCarroll DENVER (CBS4) - This holiday season layaway plans have made a comeback at many retailers across the country. It's a way for customers to pay for merchandise over an 8-12 week period instead of paying all at once.

One customer CBS4 talked with says she loves layaway.

"It's pretty convenient because we don't have the money right away to pay for all the Christmas stuff we need," she said.

But it isn't always a wise way to shop.

Layaway lures customers in with the promise of paying no interest as James Maxwell of Sears in Cherry Creek pointed out.

"There's no interest rate but you'll have a small fee to start a layaway plan and you also pay a percentage up front," Maxwell said.

The costs are what you need to examine when deciding if layaway is right for you:

Here's one example. If you buy a product for $100, the service fee is typically $10 over a 2-month period. If you bought that same item on a credit card and paid it off in 2 months, your average fee would be $2.

If you can't make your payment deadline, stores often charge a $15 to $25 cancellation fee in addition to the $10 non-refundable service fee you paid at the start of the plan. That means you could be out $25 to $35 but would receive nothing for it. That's not a good deal.

"All payments have to be done by Dec. 16 so everything needs to be out" said Walmart employee Paige Beasley.

Beasley says the layaway program has been incredibly popular this year..

Carla McManun always pays off her layaway bills so she feels it makes financial sense for her. She has items on layaway at Walmart and Burlington Coat Factory.

"The great thing is I don't have to pay for it all at once as long as I pick it up on time I'm great," McManun said.

Still, some suggest it's better to stay away from layaway. An older customer puts his financial philosophy in very simple terms.

"I never buy anything I can't afford," he said.

Just remember stores are in the business of making money and layaway is not a free service they're offering you.

Here's what you need to know:

-- Is there a penalty if you're late with a payment?

-- Do you get your 20 percent deposit back if you can't meet the final payment deadline?

-- What happens if the item goes on sale while it's on layaway? Are you eligible for the lower price?

-- Make sure the store you use for your layaway won't be going out of business anytime soon.

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