If you've taken advantage of store layaway plans for buying Christmas gifts, you're probably making the last payments on those items and retrieving them soon.
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Layaway plans allow you to buy merchandise by making periodic payments over an extended period of time, such as one to three months. The store holds the item for you and releases it only after you've made the final payment.
Major retailers, such as Sears, Kmart and Toys R Us, have policies to refund your money -- less a fee -- if you don't make all the payments on time or if you have to back out of the plan. However, not all merchants operate in the same manner.
"It's the smaller stores that you have to watch out for," says Jane Griggs, president of the Utah Better Business Bureau (BBB). The majority of complaints they receive are about "mom and pop shops, and a lot of complaints about pawnshops," she says. Even worse, "People have complained that companies have gone out of business and they didn't get their money back at all."
Layaway plans were widely popular in retail stores during the 1970s. They went out of favor as and store charge accounts -- which allow you to take the merchandise home the same day you covet it -- became widespread. In recent years, however, layaway has made a comeback with some retailers.
Consumer groups offer these tips for smooth layaway retrievals:
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Read the terms of the deal. Know the payment deadlines and amounts that are owed. Many stores have 30-, 60- or 90-day plans or eight- or 12-week plans. All typically require a nonrefundable service fee of $5 or $10 and a deposit of 10 percent or 20 percent of the merchandise. Payments of equal amounts are stretched out over the remaining contract time.
Expect a fee if you cancel. If for any reason you decide you don't want the items you've placed in layaway, you can cancel the order and get a refund of payments you've made -- except the nonrefundable service fee. There is a $5 to $20 cancellation fee, depending on the retailer. Some stores, such as Burlington Coat Factory and Baby Depot, will refund payments only on a store gift card, meaning you won't get cash back.
Meet your pickup deadline. Some stores have a deadline for retrieving holiday layaway items, such decorations, gift boxes and Christmas lights. Sears and Kmart, for instance, require that holiday items are paid and picked up by Dec. 4, 2010. At Toys R Us, holiday purchases must be paid in full by Dec. 13, 2010.
Says Griggs, from the Utah BBB: "We're in the first week of December and there aren't very many days left. You've got to do your planning and make sure you know when you've got to make that last payment."
Don't wait until the last minute to redeem layaway gift items if the special event is close at hand. For non-holiday items, Toys R Us makes the merchandise available to you within 14 days of the final payment. If you pay off the balance early -- in other words, make the final payment before the due date -- the store warns that the item may not be available immediately. Many layaway items are warehoused at off-site locations and must be sent to the store.
On retrieval day, don't go to the store empty-handed. "Keep your receipts as you pay and bring that with you," says Griggs. Some stores may require a photo ID to verify that they are releasing the merchandise to the correct person.
Missed a payment? Know the consequences. If you miss a payment for any reason, it can void the layaway contract and your merchandise will be placed back on store shelves for sale to other customers. Sears and Kmart have a seven-day grace period for late payments. If you fail to pay by the eighth day, your layaway item is returned to store shelves and you are refunded any monies you've paid minus a cancellation fee. Other merchants may not offer such a grace period on payments, so ask before you sign up.
At Kmart and Sears, the largest retailers offering layaway plans, customers must sign a receipt acknowledging that they understand the rules, says Salima Yala, divisional vice president of financial services for Sears Holdings Company, which owns the giant retail chains. "It states clearly what the rules are. The seven-day grace period is one of the rules. If they are short on cash and they don't have the ability to pay during that time they won't have the contract canceled."
Don't count on getting a new sales price. What happens if you put an item on layaway at one price and it goes on sale at a lower price a few weeks later? Kmart and Sears allow limited price adjustments only within seven and 14 days, respectively, of opening the layaway plan. After that, you must cancel the contract and pay the cancellation fee if you no longer want the item at the initial price. Toys R Us says you cannot make changes to your layaway order. Check with your retailer about its specific policy.
Beware of online layaway plans. Driggs, from the Utah BBB, warns consumers to beware of online layaway programs. "The store doesn't actually physically order it until you've actually paid it off," she said. Some consumers who've used online plans have complained that their merchandise was out of stock by the time they paid for the item. Driggs advises customers to ask in advance where their merchandise is being held and what the refund policy is if items are out of stock.
At Sears and Kmart, "In order to place an item on layaway, whether in-person or online, the item must be in stock inside the store, so if an item is unavailable, it cannot be placed on layaway," according to company spokesman Cory Dimitrakopoulos. "Once the item has been included in a layaway contract, assuming payments are being made on time, the item will remain within that particular layaway 'basket' until the contract is completed. Therefore, a customer is not likely to run into this situation unless they've missed a payment for seven days, at which point the item would be returned to shelves and available to other shoppers."
According to the Toys R Us policy: "If, when you make your final payment, we are unable to provide you with the merchandise specified in this layaway contract, you will receive a full refund of your deposit and all subsequent payments made under this contract."
The Toys R Us program has become a popular buying option for gift givers, says Jennifer Albano, senior manager of corporate communications for the toy retailer. "Thousands of customers have taken advantage of layaway since we began offering the program last Christmas. By using layaway, gift-givers can make important Christmas purchases early in the busy holiday season, providing shopper's peace of mind that they have reserved the exact item at the top of a loved one's wish list."
Griggs advice for future layaway users: Know the details of the layaway plan before you sign up.
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