Alert
Close

Think you know AARP? What you don't know about us may surprise you. Discover all the 'Real Possibilities'

Highlights

Open

You and Your Town Contest-You could win an AARP RealPad

AARP Auto Buying Program

Contests and
Sweeps

$10,000 Winter Escapes Sweepstakes

Beat the cold and cozy up to a chance of winning $10,000! See official rules.

Driver Safety

Piggy bank on the road - AARP Driver Safety

Take the new AARP Smart Driver Course!

AARP Books

Visit the Money Section

Enjoy titles on retirement, Social Security, and becoming debt-free.

Jobs You Might Like

most popular
articles

Viewed

Save a Buck

Does Layaway Pay?

You buy on installment. There's a service fee, but no interest

En español | 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.

Sign up for AARP's Money Newsletter.

Tammy Wyatt, a layaway specialist at Kmart (photo by Nell Redmond/AP Photo)- Stores let customers make installment payments toward holiday gifts to avoid adding to credit card debt, but they will incur fees.

Read the layaway plan's fine print and think of the service fee as interest. — Photo by ll Redmond/AP Photo

As the holiday shopping 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 electronics, 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 credit card.

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: How bad credit costs you more. >>

Joan Rattner Heilman writes about good deals and where to find them.

Topic Alerts

You can get weekly email alerts on the topics below. Just click “Follow.”

Manage Alerts

Processing

Please wait...

progress bar, please wait

Tell Us WhatYou Think

Please leave your comment below.

The Cheap Life

Jeff Yeager Cheap Life Ultimate Cheapskate AARP YouTube web series save money

Catch the latest episode of The Cheap Life starring Jeff Yeager, AARP's Ultimate Cheapskate. Watch

Discounts & Benefits

From companies that meet the high standards of service and quality set by AARP.

Life insurance: you are covered rain or shine

Exclusive annuities for members from AARP Lifetime Income Program from New York Life.

AARP Credit card from Chase

Members can get cash back rewards on purchases with the AARP® Credit Card from Chase.

Homeowners Insurance
Member Benefits

Join or renew today! AARP members receive exclusive member benefits & affect social change.

Rewards for Good

Your Points Balance:

Learn More

Earn points for completing free online activities designed to enrich your life.

Find more ways to earn points

Redeem your points to save on merchandise, travel, and more.

Find more ways to redeem points