Ready to start your holiday shopping? Finding the best way to pay for your gift purchases will help you stretch your budget even further. Two options you may want to consider are no-interest credit cards and layaway.
When you make a purchase on layaway, you're asking the merchant to hold your merchandise while you make weekly payments on it for a pre-determined number of weeks. You'll usually have to pay a layaway fee and make a down payment on your purchases. You can't take your merchandise home until you've paid off the entire amount.
If you miss payments, the retailer can return the merchandise to its store inventory. It will refund the money you've paid, but only after subtracting the original layaway fee and a cancellation fee.
Layaway can be good for some shoppers. For one thing, you'll know that the gifts you give are already paid for; there are no big post-holiday bills. Plus, with a layaway plan you can pick up popular toys or electronics early, when the selection is still good. And if you're short on space, having the store hold on to your presents until the week before the holiday could be an advantage.
There are also no qualification checks when you pay by layaway. As long as you're able to put down the deposit and pay the fee, the store is willing to hold the merchandise for you.
But there are drawbacks to layaway. Some stores limit the number and types of items that you can put on layaway, or they may require a minimum purchase before you can use it. Layaway fees can add to the cost of an item; a $10 fee might not be a big deal on a $300 television, but you probably wouldn’t want to pay that on a $40 video game.
Layaway can be inconvenient, because you'll have to travel to the store to make payments-and that may tempt you to spend more money as you wander through the holiday-decorated stores. If you hate long lines, remember that the week before Christmas can be a crowded place at the layaway pickup counter.
Some people take advantage of no interest credit cards to finance their holiday purchases. Qualified shoppers can often find an offer for a new card or a balance transfer card that allows them to make purchases and carry a balance on the card for up to 18 months without paying interest.
One advantage to using a credit card is that you get immediate possession of the merchandise without having to come up with any cash right away. This can be a real plus if you like wrapping presents early or have to ship gifts out of town.
With a credit card, you won't have to pay any up-front fees as you do with layaway. You may even be able to earn some points, miles or other rewards on your purchases (depending on the kind of card you have). If you're just opening the card, you may have up to 18 months to pay off your purchase-a real advantage if you've bought a big-ticket item.
If you pay off your credit card balance before the introductory no-interest period expires, you get free use of the bank's money to make your purchase. But be warned-since credit card rates are often high, you could end up paying steep interest if you don't pay off your balance within the allotted time period.
Another drawback to using credit cards is that you may be tempted to spend more because you're not forced to put up any cash right away. In addition you'll start off the new year with debt hanging over you.
No matter what your choice of payment -- layaway or a zero-interest credit card -- the best way to ensure that you'll have a financially comfortable holiday is to make a gift budget and stick to it. One of the best presents you can give to your family and to yourself this holiday season is not getting in debt over your head.