With so many Americans still
struggling financially and reeling under credit-card debt  – our recent holiday poll reveals that an estimated 13.5 million consumers are carrying debt leftover from last
Christmas – layaway is likely to be an even more attractive alternative to pay
for gifts this holiday season. Beside Sears and Kmart, major retailers offering
layaway plans include Toys “R” Us, Babies “R” Us, TJ Maxx, Marshall’s, and
Burlington Coat Factory.  Layaway
is also available for many online purchases through third-party firms like
eLayaway, which has an affiliate relationship with more than 1,000 merchants
such as Best Buy, Bass Pro Shops, Apple Store, and The Home Depot.

If you’re unfamiliar with
the layaway process, here’s how it works: 
You enter into a contract and make an initial deposit based on a
percentage of the purchase price, along with a service fee to administer the
plan and keep the item in storage. There are no interest payments, since you
don’t actually take possession of the merchandise until you’ve paid for it.

Like any transaction, you
can avoid potential pitfalls by doing some preliminary legwork. Toward that
end, the Better Business Bureau just released a checklist of key
questions to ask before opening a layaway account:

• How much time do I have to
pay off the item? The usual timeframe is usually 30 to 90 days.

• What’s the minimum down
payment? Ten to 20 percent is common.

• When are payments due?
After the initial down payment, some contracts require additional contributions
weekly or every two weeks; some let you make payments whenever you want during the timeframe.

• Are there storage or
service-plan fees? Kmart charges a flat $5; Toys “R” Us has a $10 fee.

• What happens if a payment
is missed? Are there penalties? Does the item return to inventory? If you miss
a payment or fail to pay the minimum due, you might have to double up on your
next scheduled payment.  At some
stores, the merchandise is returned to the shelf as soon as 7 days after a
missed payment.

• Can I get a refund or
store credit if I no longer want the item after making a few payments? Cancellation
fees typically range from around $5 to $10. At Burlington Coat Factory, layaway
deposits and payments are non-refundable, but may be converted to a gift card
if layaway is cancelled. In addition, the company won’t give you a
refund if you decide to return an item you’ve paid for in full, only a gift
card.

• What happens if the item
goes on sale after I’ve put it on layaway? Kmart won’t make any price
adjustment after 7 days from the date you open a layaway account. Sears gives
customers a 30-day window.

• Get it in writing. Don’t
take the salesperson’s word for it. Ask for the complete terms and conditions in
writing. And be sure to keep detailed and accurate records of all payments
made.

Layaway plans aren’t
specifically regulated by Federal law, although the Federal Trade Commission
can go after a company for unfair or deceptive practices. Click here for
information about filing a claim. Check with your state attorney general, local consumer
protection agency, or the local Better Business Bureau  to find out if state or local laws cover layaway purchases.