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Do this instead of maxing on credit during the holidays

Give the plastic a break: Here’s layaway

Credit card transaction
Simon Dawson | Bloomberg | Getty Images

If there's a big-ticket, must-have gift on your shopping list, put down the plastic and try this instead.

Layaway, a program in which you put down a deposit on a costly item and make a series of installment payments toward it, is back for the holiday season. Walmart's program, which runs from Sept. 12 to Dec. 12, is in full swing.

You can also put gifts on layaway at GameStop, Toys R Us, Sears and other retailers. Some airlines, including Delta and United, offer programs that will allow you to pay for your vacations under an installment plan.

Layaway might make sense if you're calling dibs on an item that's in high demand, like an Xbox One S, or if you're plunking down a large amount of cash for a pricey 65-inch Ultra HD TV. These items retail for $299.99 and $1,697.99, respectively.

Consider that the average indebted U.S. household owes $15,675 on their credit cards, according to NerdWallet. It just might be better to make manageable payments in cash.

Take the time to read up on your retailer's specific policy. Even if you aren't paying full price upfront, you can still have plenty of money on the line. You may be subject to fees for starting and cancelling the plan.

At the end of the day, you don't get your item until you've completed your payments.

"We recommend looking into a program and reading the fine print and details before you sign up," said Courtney Jespersen, a retail analyst at NerdWallet.

Check store policy first

Here are the key areas where you're likely to see some differences between retailers.

Availability: Most major retailers allow you to buy your items online, but those who offer layaway might have different terms for purchases made in-store versus the web. Sears and Kmart, for instance, offer 12-week payment plans for items you buy in person. If you're buying on the web at these two retailers, you may use the eight-week plan. Layaway is available in-store only at Burlington Coat Factory and Walmart.

Eligibility: You may be disappointed if you're looking for a hot toy, as retailers can limit which items are eligible for installment payments. For instance, last month Sony unveiled its PlayStation VR, a virtual reality gaming headset. Unfortunately, it's not among the layaway-eligible items available at GameStop.

Down payments: Be ready to put something down upfront. Some stores will allow you to put down as little as $10, which is generally the case with Kmart. However, through Nov. 26, the retailer is hosting its No Money Down layaway program, which allows shoppers to put nothing down for in-store purchases and one-cent down for purchases online. The store will revert to its regular program after that date.

Fees: Be on the lookout for additional costs in the form of service and cancellation fees. For instance, Sears charges a service fee of up to $10. If you decide you no longer want your item, it will cost $25 to cancel the payment plan.

"If you start making payments and then realize you don't want the product, you might get a refund minus the cancellation fee," said Jespersen of NerdWallet.

Service fees are critical because you when account for them, you could be paying well over the purchase price by the time you're done with your installments.

Planners' perspectives

Financial planners warn consumers to proceed with caution.

Understand that your layaway plan may be subject to state and local regulation, as well as the Truth in Lending Act under certain circumstances. Know the fine print before you apply.

"You're giving your credit card a break," said Pamela Capalad, a certified financial planner in Brooklyn, New York.

"Store cards' '12 months with zero percent financing' deals get people into the trap of taking a year to pay things off," she said.

At the same time, you should consider whether it's really worthwhile to buy that big-ticket item in the first place.

"The practical side of me wants to say, 'Don't buy stuff you can't afford,'" said Katie Brewer, founder of Your Richest Life in Garland, Texas.

"I've seen instances where layaway is the lesser of two evils: It's better than accumulating debt and dealing with it over the next couple of months," she said.

(Update: This story has been updated to add information on Kmart's holiday layaway program.)