A:

Layaway plans are a way to buy larger items without having to come up with the entire cost at once, and without paying the exorbanant interest fees associated with most credit cards. Many stores will even allow you to put an item into layaway with no fees. Obviously, the disadvantage of layaway is that you cannot have the item you purchased until it is paid off in full. However the many advantages (such as no interest, fixed future price and no-risk of default over a missed payment) is often more than enough to outweigh the credit card interest that can be avoided. As well, layaway plans report to credit bureaus, so paying off your item over a series of equal installments is a great way to add another good reference to your file. (Read Consumer Credit Report: What's On It to take a closer look at the various components and considerations of the personal and financial data that go into this dossier.)

For many, layaway plans are used as a budgeting tool. Instead of trying to save for an item in your own account, the layaway plan is a forced savings program which has to go towards the purchase, and cannot be used for something else. By adjusting your household budget to allow for the layaway payments, you are getting into the habit of saving a regular amount. When the layaway payments have ended, you already know you can afford them, so you might as well continue the payment into your own savings account.

For their forced savings, no interest and lower-risk advantages, layaway plans are a great way to obtain the larger items you may require without having to borrow the money. With no interest, this will be much quicker than the same payment against a store credit card.

This question was answered by Ayton MacEachern

RELATED FAQS

  1. How does quantifying fixed overhead volume variance show whether a company is profitable ...

    Find out why some fundamental analysts look at fixed overhead volume variance as an indicator of company profitability or ...
  2. What is price variance in cost accounting?

    Understand what price variance is in relation to cost accounting. Learn the most common way price variance arises and how ...
  3. What are the benefits of using ceteris paribus assumptions in economics?

    Find out why mainstream economists rely on ceteris paribus assumptions in their models, even though they know those models ...
  4. When do I need to project run rates for my business?

    Learn some of the reasons why businesses project run rates; discover why companies rely on such a simple metric and how it ...
RELATED TERMS
  1. Per Transaction Fees

    An expense a business must pay each time it processes a customer’s ...
  2. Satisfaction And Release

    Formal paperwork stating that a consumer has paid the full amount ...
  3. Conjoined Account

    An account that has more than one account holder.
  4. Primary Account Number (PAN)

    The 14, 15 or 16 digit number that appears on the primary account ...
  5. Carding Forum

    A website dedicated to the sharing of stolen credit card numbers. ...
  6. Cape Cod Method

    A method used to calculate loss reserves that uses weights proportional ...

You May Also Like

Related Articles
  1. Credit & Loans

    American Express's Main Competition

  2. Budgeting

    Who Spends More On The Military China ...

  3. Forex Fundamentals

    Bitcoin Transactions Vs. Credit Card ...

  4. Credit & Loans

    How Is Cashback Profitable For Credit ...

  5. Credit & Loans

    Meet The Company Behind Your FICO Score

Trading Center