Layaway Service Fee Pay by Installment Save a Buck AARP Bulletin
Layaway Service Fee, Pay by Installment - Save a Buck - AARP Bulletin
Photo by ll Redmond/AP Photo Read the layaway plan's fine print and think of the service fee as interest. As the season approaches, major retailers Sears, Toys "R" Us, Wal-Mart, Kmart and Best Buy all offer plans, as do many smaller stores. Generally, you're charged a service fee, typically $5, and have to make a 10 or 20 percent down payment. Other conditions may apply. At Wal-Mart, for example, Christmas layaway is restricted to toys, jewelry and , items must cost $15 or more and the total purchase must be at least $50. Toys "R" Us charges $10 for cancellations.
Before signing up for a layaway plan, read the fine print. And do the math. It's true you're not charged interest, but try viewing the service fee as equivalent to interest. For example, suppose you get a doll on layaway and pay $60 in installments over three months, plus a $5 service fee. You're effectively borrowing that $60. That $5 fee as interest for three months would equal $20 on an annual basis. In other words, you're getting a loan at a 33 percent interest rate. You'd come out ahead just putting the doll on a On the other hand, in this age of overborrowing, plans that encourage saving and paying first can seem refreshing. You'll have the doll without the debt. Also of interest:
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Does Layaway Pay
You buy on installment There' s a service fee but no interest
Back in the day, layaway was the way to go if you wanted to buy something but were strapped for cash. You reserved an item in a store, paid for it in installments and took it home when you completed the payment. Now, with many Americans finding ready money in short supply, layaway is making a comeback.Photo by ll Redmond/AP Photo Read the layaway plan's fine print and think of the service fee as interest. As the season approaches, major retailers Sears, Toys "R" Us, Wal-Mart, Kmart and Best Buy all offer plans, as do many smaller stores. Generally, you're charged a service fee, typically $5, and have to make a 10 or 20 percent down payment. Other conditions may apply. At Wal-Mart, for example, Christmas layaway is restricted to toys, jewelry and , items must cost $15 or more and the total purchase must be at least $50. Toys "R" Us charges $10 for cancellations.
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Before signing up for a layaway plan, read the fine print. And do the math. It's true you're not charged interest, but try viewing the service fee as equivalent to interest. For example, suppose you get a doll on layaway and pay $60 in installments over three months, plus a $5 service fee. You're effectively borrowing that $60. That $5 fee as interest for three months would equal $20 on an annual basis. In other words, you're getting a loan at a 33 percent interest rate. You'd come out ahead just putting the doll on a On the other hand, in this age of overborrowing, plans that encourage saving and paying first can seem refreshing. You'll have the doll without the debt. Also of interest:
Joan Rattner Heilman writes about good deals and where to find them. Cancel You are leaving AARP.org and going to the website of our trusted provider. The provider’s terms, conditions and policies apply. Please return to AARP.org to learn more about other benefits. Your email address is now confirmed. You'll start receiving the latest news, benefits, events, and programs related to AARP's mission to empower people to choose how they live as they age. You can also by updating your account at anytime. You will be asked to register or log in. Cancel Offer Details Disclosures