Layaway or No Interest Credit Cards for Christmas?

by Samantha Bennet on 2012/12/16

 

layaway versus no interest credit cards layaway versus no interest credit cards

The Christmas shopping season is finally here. This year, you may have the resolve not to overspend using your credit cards again.Prepare for a tight battle with your biggest enemy as a consumer—yourself.There are two options to take to generate savings and avoid hefty interest and penalty costs: the layaway and the no-interest credit cards.

Layaway is different because you will reserve the item you want to buy and pay for it in your most comfortable terms. You will not get to take home that item until you complete all payments.

It is like saving for any significantly priced merchandise.When using a no-interest credit card, you can instantly take home the item and take care of the payments afterwards. The catch is that if the debt stays longer, it may not be spared from any interest or penalty fee.

The advantages and disadvantages of layaway

Layaway is a transaction that does not come with any risk of incurring credit card interest or debt. A consumer who buys an item using even a no-interest credit card may end up paying the debt for years and not be spared from interest charges and other fees.

However, layaway is not without any risk. You could still incur penalties for failure to complete the transaction but the fees for cancellation of the purchase may still be cheaper than charges incurred when paying off a similar transaction using even a no-interest credit card.

Layaway fees are decreasing. The intensifying competition among retailers prompts them to lower layaway fees and offer better terms to customers. This could be both good and bad.

It is good because smaller fees are incurred. It is bad because you may be tempted to put more items on a layaway. If you don’t control the urge to shop on a layaway plan, you may end up paying too much for so many items.

Lastly, layaway angels may suddenly cover your bill. Some people may be too generous during Christmas season and pay for others’ layaway payables.

For instance, Secret Santas paid off layaway accounts of people they do not know last year at Kmart and other retailers all over the country. You can have your fingers crossed and pray for a miracle for a Secret Santa to cover your layaway expense this time.

Advantages and disadvantages of no-interest credit cards

Perhaps you may be considering using no interest credit cards for your Christmas shopping. If you intend to immediately repay the amount of purchase, this would certainly be the better option. You may not incur any fee that is imposed in a layaway.

However, be reminded that most no-interest credit cards only impose 0% interest for a specified period.

It may take just one to three months to enjoy interest-less transactions. Be prepared because after the period of zero interest, your card’s interest rates may suddenly be imposed, usually higher compared to rates implemented by ordinary credit cards.

Layaway could be ideal or not, depending on how you look at it. If you dislike accumulating credit card bills, it is the perfect product for you. You may also realize that it is the lesser evil compared to using credit cards.

As always, in the absence of self-discipline and self-control, layaway may bring about trouble especially if you end up failing to meet scheduled payments.

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