Should you put your next vacation on layaway? -

Should you put your next vacation on layaway?

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If you can't afford to take a romantic weekend getaway or a family ski trip, you may be tempted to put your travel plans on layaway.

It sounds simple. You make a deposit, a few payments on the remaining balance, and the trip of your dreams is yours for a locked-in, package-deal price. 

One of the biggest bonuses of a layaway vacation is that unlike paying with a credit card, the packages usually lock you in on a low price you can pay off over time and it's almost impossible to rack up a pricey interest bill if you're late on payments.

Before you book your next vacation, beware. 

Bryan Philpott is a registered investment advisor and he says there might be a better way of paying for your next trip.

By properly saving for your next vacation, Philpott says "You could do it without the fees and probably end up with a better location and a better destination." 

Some layaway travel plans do charge fees for the service which Philpott says is reason enough to avoid it.

Instead, he recommends opening a separate savings account that automatically withdraws a small amount from your checking account every week. 

After about six months, Philpott says, "You'd be amazed what you'd come up with and be able to take that vacation without going into debt." 

You can also do this without putting your money in someone else's hands.

Saving up in your bank won't cost you a cancellation fee or your deposit if you need to cancel the trip.

"You know there is no real burden of losing anything," Philpott says. 

If you do decide to go the layaway route, here are some tips from the Federal Trade Commission.

Check with your local Better Business Bureau or your state Attorney General's office too see if any customer complaints have been filed against the company offer the vacation layaway. 

Get their layaway policy in writing and read the fine print. Know when your payments are due.

Find out how long you have to pay it all off and ask about late payments, fees and a refundable deposit.  

Finally, be sure to keep a record of all your payments. 

"Always plan for the worst, and enjoy the best," Philpott says.  

No matter where you get your travel deal or how you choose to pay for it, Philpott says his best advice is to budget in an additional 10-percent to cover unexpected expenses. 

It's the one thing he says almost everyone forgets to pack and it will make for a much smoother landing on any voyage either via layaway or from the money you've been saving away. 

You should also do your research on any company offering layaway vacations.

For example, Sears offers travel layaway and they're well known company.

Be wary about websites that offer travel layaway plans especially if they haven't been in business for a very long time, or if they don't have a history of satisfied customers.  

Additional Information:

  • The following information is from a TIME article entitled "Going on Vacation? Now You Can Put it on Layaway."
    • Sears allows you to book hotels, cruises, car rentals and flights, as well as 100 pre-paid vacation packages starting at $399 by placing them on layaway. 
    • Since the recession, consumers have had a harder time getting access to credit cards, and many retailers saw an opening to finance purchases over time that seemed to have closed a few years ago.
    • The one big problem with layaway: it's often not a smart financial move. One study has shown that consumers who use a credit card over layaway will end up paying less interest on the purchase.     
    • The one positive aspect of choosing layaway over using a credit card is that there's virtually no way consumers can get buried in overwhelming debt in the same way they can when using plastic. 
    • Read the plan's fine print, know precisely when your payments are due and how much time you have to pay off the purchase.
    • Figure out what Sears' fees are for late payments and whether you'll have to pay any additional travel booking fees. 
  • As more Americans gained access to credit, most stores got rid of layaway plans, which allow customers to pay off big purchases over the course of a few weeks or months. Stores preferred shoppers to use plastic because the swiping of a credit card was much simpler than administering layaway payment plans, and also because consumers are likely to buy more when paying with credit. (Source: TIME, Layaway: Worse Than Using a Credit Card?)
  • According to Cornell University Professor Louis Hyman, typical shoppers wind up paying far less interest by using a credit card, even ones with a high APR (vs. layaway). Click to read more.
  • For tips concerning layaways and online layaways, click to read the Federal Trade Commission's Consumer Alert entitled "Layaway: Another Way to Buy"

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