Credit Cards vs Layaway Plans
By julianne, October 25, 2011, Shopping Tips
As the economy continues on a slippery slope, more retailers are returning to the practice of offering shoppers layaway plans. The past several decades have been known as the credit card generation and consumers continually purchased items with money they didn’t have; often at prices they couldn’t afford. The practice of shopping on borrowed money is risky, especially since credit cards carry interest rates and fees. What at first appears a simple purchase can quickly amount to an unexpected expense that not only strains the wallet but negatively impacts a person’s credit score. With layaway plans, you don’t need to worry about damaging your credit report by failing to make a payment, nor do you need to concern yourself with interest rates and fees. When it comes to comparing layaway plans vs credit cards, layaway plans carry less risks.
That’s not to say that layaway doesn’t carry a degree of risk; it does. A layaway plan consists of a consumer selecting a single or a multiple products and entering a contract where they pay a regular portion of the total due until the balance is paid in full. Most layaway plans will require an initial deposit, such as a percentage of the total cost, in order to begin the contractual agreement. There is an agreed upon date by which the consumer agrees to pay the balance and at the time of final payment, the consumer receives the items and the layaway plan is finished. Those who put items on layaway run the risk of failing to meet the payments in the agreed upon time and losing the money invested towards the balance. When comparing layaway plans vs credit cards, however, it is clear to see that the risks associated with credit card purchases are greater than those with layaways plans.
Some layaway plans may charge a service fee for enacting the agreement. This is often an inexpensive fee added to the total purchase price. When compared to the cost of interest fees associated with a credit card, as well as additional fees for late payments, the initial set up fee for a layaway plan is considerably less expensive. Each retailer will determine their set amount for establishing the plan and what percentage they will require the consumer to make, as well as the frequency in which payments are made. But there are some things to keep in mind to ensure you maximize savings with a layaway plan and don’t fall into any traps.
For best protection, choose cash or use a debit card for your layaway payments and not your credit card, as some retailers may offer you the option of using credit for payments. Those who use credit cards for layaway payments may find themselves running into higher fees and if they default may find their credit score is compromised. Also, check whether or not the retailer charges a fee for missed payments or failure to purchase the items. Look for layaway plans that are consumer friendly and truly offer shoppers a convenient way of shopping and aren’t out to make a profit from missed payments. Keep in mind that all retailers have different terms and it’s best to compare various layaway plans in order to find the policy that best meets your needs.
The most important factor to consider when comparing layaway plans and credit cards is whether the plan will put you further into debt. A layaway plan is a debt free option that when used strategically, can help you remain within your budget while purchasing the items, gifts, clothing, even top name electronics and devices in a manner that is simple, convenient, easy to manage and affordable. Shopping on credit is risky and can send you plummeting into debt. Without at doubt, the temptation to use credit during the holiday season is unparalleled. Many want to give nice, expensive gifts and credit makes it easy for people to spend outside of their means. The satisfaction of purchasing the item is short lived as reality soon sets in and the realization of debt, fees and high interest rates brings greater financial difficulties. Choosing a layaway plan provides greater benefits as the consumer does not risk going into debt, has greater control over the amount spent and can purchase items that may otherwise be outside their budget.
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