Credit cards can be better than Layaway

Published on March 7, 2012, by in Uncategorized.

Millions of consumers across the country are likely going to increase their monthly spending significantly after getting tax refunds but many may be unsure or even wary of the effects that this extra spending will have on their finances.

In many cases, consumers will fund their holiday gift-purchasing efforts with a credit card, and then pay that debt down over the course of a few months, according to a report from Tampa, Florida, television station WTVT. Fortunately, many stores are now returning to an old policy that many may find more suitable financially. The concept of layaway used to be quite popular among consumers before the credit card boom of the last few decades, but has fallen out of favor and been eliminated at many popular retail chains.

But now, as consumers have become more cash-conscious since the recent economic downturn, a greater number of stores are offering layaway as a payment option once again, the report said. And because it was gone for so long, many may not know the difference between this and making a purchase using a credit card. It’s really quite simple.

By paying with a credit card, a customer would be receiving the item at that time and then paying back the amount they owe as a result at a later date, and usually with interest added on. However, with layaway, a shopper would put a certain amount down – usually 10 percent of the purchase price of $5 at minimum – to essentially reserve the item, then pay the remaining balance over a short period of time until they have paid for the item in full.

Therefore, layaway may be a better option for those consumers who are looking to save money on their holiday gift purchases but do not have the cash on hand to buy everything they want right now. This is because it allows consumers to obtain an item, but pay for it before taking it home, and without racking up significant interest charges that can be difficult for many to afford.

However, some stores may charge extra for reserving an item, meaning that consumers will have to consider the cost of reserving an item in this way for a month versus what they would pay for putting it on their credit card given their unique interest rate.

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