Is It Worth It? A Look at Layaway and Toy Reservations

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Layaway seems harmless enough, but unless you are taking advantage of the free layaway programs being offered by some retailers this year, it might not be the bargain it seems.

Proponents often argue that layaway helps consumers avoid paying interest on credit cards, but if you add the fee some retailers charge to put items aside, plus the cost of transportation back and forth to the store to make payments, how much money are you really saving? And it can be even riskier if you're not sure you'll have the money to pay the bill because you can stand to lose the payments you have already made if you miss a payment.

Still, this year, layaway may make slightly more sense because more retailers are trying to outdo each other by offering sweeter layaway terms. Many have waived the layaway fees for parts of the holiday season as they fight to win your business. Some even allow you to make payments online, which eliminate the need for extra trips to the store.

But be warned: If you change your mind and cancel your order, most retailers are still charging cancellation fees. Also, you must be able to pay for the item in full within the required time period, and a down payment is usually required. Best Buy, for example, requires a sign-up fee of 5 percent of the item's cost, plus a 25-percent down payment.

And not all products will qualify to be put on layaway at most stores so check ahead with the retailer to see if the item you're buying qualifies.

Beyond the economics, there are some advantages to layaway. If you are a cash-strapped parent of a child who has a gift on their wish list that they must have, it may make sense to stake your claim. Putting the toy on layaway guarantees you'll have it, and keeps it hidden from prying eyes that may find it tucked away on that shelf in the closet.

That may explain why toys tend to be one of the most popular types of products that are put on layaway.

Toys 'R Us spokeswoman Jennifer Albano said most customers who use layaway are buying either higher-ticket items such as electronics or bigger gifts such as a train table, a dollhouse or a bike.

The bottom line is the terms vary from retailer to retailer, so consumer advocates caution shoppers to read the fine print. But here are some highlights:

• Sears and Kmart, which offers layaway all year long, have some of the most comprehensive policies. Sears is waiving the $5 and $10 fees it usually charges during two separate periods, from Sept. 29 through Oct. 29 and then again from Nov. 2 through Dec. 3. Online payments and layaway reservations are allowed, and merchandise can be delivered to shoppers' homes or picked up at the store.

Kmart also allows online reservations. Its service fee is eliminated until Nov. 17.

Cancellation fees still apply at both Sears and Kmart, and can be as high as $20 for 12-week contracts.

• Wal-Mart charges $5, but it refunds the amount in the form of a gift card when customers pick up their merchandise.
• Toys 'R Us offers free layaway through Dec. 16. It initially planned to waive its customary $5 layaway fee until Oct. 31, but extended it, saying the response from its customers has been "fantastic." (Read More: Toys 'R Us Pays It Forward, When 'Layaway Santas' Pay It Off)
• Target does not offer layaway.

Of course, you could skip layaway and still make sure you have the toy your child is asking for this year.

When It Has to Be Voodoo Purple

Toys 'R Us has introduced a new program that allows customers to reserve any of the 50 toys on its Holiday Hot Toy List. But there are a few catches. First, act fast. The reservation must be made in person at a Toys 'R Us store by Oct. 31, and it requires a 20-percent nonrefundable deposit to make the reservation. Once reserved, shoppers will have until Dec. 16 to pick up the item. (Read More: Hot Holiday Toys 2012)

Source: Toys 'R Us

The reservation idea can work for parents who know they want a certain item early in the holiday season, and may be helpful for items like Hasbro's Furby, which are already popular and come in several different colors. If a child wants the "Voodoo Purple" Furby and a "Sprite Yellow" one won't do, parents might save themselves some running around by reserving the right color. Of course, buying the item online early in the season can accomplish the same goal. (Read More: Hot Holiday Toys—Even Santa Needs a Reservation)

And let's face it, with toy sales struggling, not all of the 50 items on the hot toy list will be in short supply. That means for those items, there is no need to tie up the 20 percent deposit, or even make a commitment to buy the item at a particular store. (Read More: Trouble in Toyland: Sales Slowing Heading Into Holidays)

The Truly Hot Toys

The trick will be figuring out which items are truly hot and will be short supply — and that your child will still want come December.

Toys 'R Us already has closed reservations for its Tabeo tablet computer and Nintendo's Wii U due to the high demand, Albano said. The Doc McStuffins Time for Your Check Up doll, Furby, Mattel's Monster High Meowlady and Purrsephone dolls, and Activision's Skylanders Giants toys are the top-reserved items at the stores, Albano said.

Both the Tabeo computer and the Monster High dolls are items that are only available at Toys 'R Us.

Source: Toys 'R Us

For the other items, which are available elsewhere, shoppers will want to make sure they are getting the best price. Toys 'R Us is among several stores offering price-matching programs, which lowers the risk of over-paying. Best Buy and Target are also offering price-matching guarantees on select items.

However, there is still a risk. Like layaway programs, the rules on price matching vary from retailer to retailer, and there are some notable loopholes. For example, Best Buy will begin its program on Nov. 4, but it will not be in effect from Black Friday through Cyber Monday.

Target will match select online competitors' prices in stores from Nov. 1 through Dec. 16.

At Toys 'R Us, the price guarantee is good on an identical item within seven days of its purchase.

All of these programs show how high the stakes are for both retailers and consumers. Retailers are eager to get shoppers into their stores, and shoppers remain focused on getting a good value, and they continue to apply the bargain-hunting skills they acquired during the recession.

-By Christina Cheddar Berk, CNBC.com News Editor; Follow her @ccheddarberk.

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