The Better Business Bureau is cautioning holiday shoppers about the potential pitfalls of layaway plans and has a few tips to help consumers avoid taking on payments they can't afford.

Layaway plans are appealing during the holidays because they allow the purchaser to pay in installments instead of in a lump sum and usually require a deposit and the payment of service and plan fees to hold the item.

A time frame is established for the customer to pay off the balance and once it is paid they can take the item home.

The BBB says holiday shoppers are attracted to layaway payment plans because they help ease the financial strain but that consumers need to check the rules thoroughly before signing up.

"It can be easy for people to become wrapped up in the holiday hype of buying the biggest and latest gadgets," said Sandra Crozier-McKee, president and CEO of BBB Serving Southern Alberta and East Kootenay. "It is tempting for people to automatically choose a layaway plan and talk themselves into making installment payments, but if you don't budget properly or fail to realize the plan terms and conditions, you could end up with empty pockets and empty hands."

BBB tips to avoid potential layaway problems:

  • Poor Planning. Before signing a layaway contract, make sure you can actually come up with the money to pay for the products. Unlike outstanding credit card debt, which will just accumulate interest, failure to pay your layaway means you could lose the product and any fees you may have already paid.
  • Fine Print. Ask the company for a written contract and read it carefully. Contracts should include when payments must be made and what happens if a payment is late. Keep in mind that each company may have a different layaway policy.
  • Bad Timing. Some stores only hold items for a specific number of months and then redistribute them for re-sale.
  • Location Frustration. Be sure your items will be placed in a secure area until all payments are made so they won't be sold to other customers.
  • Refund Racket. What happens if you change your mind and decide not to purchase the item? Be sure to check if refunds are available.

The BBB says consumers can also have monthly installments directly debited from bank accounts using online layaway plans.

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