How can I use layaway plans for budgeting?

By Ayton MacEachern AAA
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. What Canadian credit cards offer the best travel rewards?

    Discover Canada's best credit cards for travel rewards and the benefits that they offer. Learn how these cards can help you ...
  2. Can I get a balance transfer if I have bad credit?

    Transferring funds from one credit card to another is often possible with bad credit, but it will likely cost you in interest ...
  3. What are the different types of cash advances?

    Find out the different types of cash advances along with their different features to determine which option, if any, is best ...
  4. Is it better to get a balance transfer or a personal loan to pay off my credit card ...

    Find out what you should consider before deciding to pay off your credit card debt by taking out a personal loan or using ...
RELATED TERMS
  1. Negative Information

    Data in a consumer’s credit report that lowers his or her credit ...
  2. Cardholder Agreement

    A printed booklet a credit cardholder receives that contains ...
  3. Zero Liability Policy

    A condition in a credit card agreement stating that the card ...
  4. Card Reader

    A device that can decode the information contained in a credit ...
  5. Chargeback Period

    The timeframe during which a credit card issuer can dispute with ...
  6. Business Credit Card

    A credit card intended for use by a business rather than for ...

You May Also Like

Related Articles
  1. It can be great to live in the moment, but the actions and decisions you make now can greatly impact your sense of financial security down the road.
    Personal Finance

    How Do Americans Keep Minimizing Their ...

  2. Retirement

    Know The Cost of Living Where You Plan ...

  3. It's tough to get a credit card when you move to the U.S. with no Social Security number and no American credit history. Here's how to get started.
    Credit & Loans

    Top Credit Card Options For International ...

  4. Building back credit after bankruptcy generally starts with getting a secured credit card. Here's how to identify the best deals among the limited choices.
    Credit & Loans

    Which Credit Cards Are Best After Bankruptcy?

  5. Some credit cards offer particularly good deals for holiday shoppers.
    Credit & Loans

    The Best Credit Cards For Holiday Shopping

Trading Center