Money Fix: Layaway vs. buying with cash

Retailers will do just about anything to get you to spend money. This holiday season it won't be hard to find stores offering layaway. You can snap up hot items, stick them in layaway and pay later. Seems smart, but is it?

"Layaway works on the same principle as credit cards; they both help consumers spend more money than shopping with cash," says Michael Kresh, a certified financial planner with Creative Wealth Management in Islandia.

While layaway helps people with no credit or limited credit budget and plan their holiday spending, there's homework to be done.

Questions: Gail Cunningham, of the National Foundation for Credit Counseling in Washington, D.C., says there are a few questions you should ask: When are payments due and how much? What happens if you miss a payment? In cases of default, will there be a restocking fee? If the item goes on sale, can you take advantage of the new price?

Second trip: Another thing about layaway: You have to go back to pick up your stuff. "With a second trip, chances are you will make additional purchases," points out Tony Gao, assistant professor of marketing at Northeastern University in Boston.

Affordability: Cunningham is a fan of layaway because she says it offers a very measured approach to spending, but Quicken personal finance expert Morgan Benzian advises, "Avoid layaway. If you can't currently afford the product, avoid the temptation of purchasing it."