Valentine's Day shopping can often be overwhelming and expensive. When looking for ways to budget, layaway is an option to consider. Parents might remember it from the '80s when people would put their intended purchases on layaway in case they were sold out before they got the money together to buy it. 

Many big box stores had payment options, usually involving some sort of down payment and several subsequent payments. Layaway can be a good option for families and households trying to pace their spending. However, there are some pitfalls to watch out for. 

If you're planning on spending a small amount, it's probably worth using plastic. Buying items with credit gets a bad rap sometimes. However, assuming that you pay your bill on time, your interest rate is 0. Most layaway plans have a $5 to $10 service fee, which amounts to 5 - 10 % interest. That's 5 - 10 % more you're paying than you would be had you just paid on your credit card. Also, remember that you don't walk away with the merchandise until you have made the final payment. If you buy with credit, you walk away with your purchases and you can return the items for a full refund if necessary. 

Merchandise is flowing and abundant now. Shoppers used to opt for layaway to snag those hot toys and items before they sold out. The science of merchandising has improved rapidly in the last 15 years, and it is extremely unlikely nowadays that you won't be able to find and purchase the item you want. Online shopping mitigates the risk even more. If your sole reason for putting items away on layaway is to lock in your items before they run out, try online shopping instead. 

You might lose out on great sales. In most layaway contracts, you are locked into the price of the items from when you signed the papers. If you happen to see a great deal on some items you put on layaway, you'll have to pass them up or pay a cancellation fee, which might make the new discount useless. 

You have to make sure you can pay in full. Here's the big kicker with layaway. Unless you can pay the full amount before your contract expires (and in some cases, you are held to very strict payment plans that punish you for not paying the right amounts on time), you forfeit all the money you had put in. If you don't pay on time, you're subject to a cancellation fee in addition to the service fee you had initially put in as well as the payments you had made, and you walk away empty-handed. Your budgeting has to be immaculate, or you might end up finding that you cannot make the final payment when the time comes. 


Padmini Parthasarathy is an analyst at ValuePenguin.com, a personal finance research and analysis website. She covers the story behind the numbers on consumer finance topics ranging from household spending to dating. Permission granted for use on DrLaura.com.