Using consumer intelligence
During the holiday season, it is sometimes tough to be the customer. Getting the best deals on a budget, while making sure everyone gets what they want for gifts can be challenging. While getting these deals makes it easier to afford the holidays, there are some things to watch out for as a consumer.
Layaway may look like a good offer, but it is important to realize that it is never free. Spreading out the payments may make it easier on the budget, but in the end using layaway will likely cost extra money. The "Chicago Sun's" article, "The truth about layaway may surprise you," states that layaway can be even more expensive than credit card fees.
"If you pay a $5 layaway fee and $10 down payment on a $100 item held for eight weeks that's the equivalent of 44 percent APR on a card," said news writer Denise Nape. A consumer can lose more than just money, if they're not careful. More often than not, if a payment is missed the layaway will be cancelled and the item will be returned to the shelves. The money spent on the item will then be refunded, minus the layaway fee and a cancellation fee.
For example, Walmart Layaway terms require a 10% down payment and $5 service charge that must be paid at beginning of the layaway. When the customer cannot pay for the item a refund will be given minus the $10 cancellation fee and the $5 service charge. The same is true at Sears and Kmart except that the down payment required is $15 or 10%, whichever is greater. Toys R Us also offers a layaway plan that requires a down payment of 20%. If a payment isn't missed, but the item is no longer wanted by the consumer, many stores will charge a $15 cancellation fee.
Prices can also be a conflict with layaway. The consumer will get locked in on a price and if the item goes on sale, depending on the store policy, the consumer may still have to pay the original amount. Or if they want to return it, they may only get the sale price for their refund instead of the full amount paid unless they have saved their original receipt. Layaway may not always be available during large ‘before Christmas sales' such as Black Friday. To get the best deal, layaway may not be the best option if it ends up costing more in the end.
Cheaper than the Manufacturer's price
On Black Friday or during large sales many stores will advertise items as being cheaper than the manufacturer's suggested retail price (MSRP). However, the MSRP varies from retailer to retailer, and the items tend to already be less than what the store says the MSRP is, even when they are not on sale.
In an example from Time's Moneyland article, "6 Black Friday secrets those deal sites won't tell you about," Kohl's Black Friday ad offered an 18-piece set of Cuisinart knives for $59.99, down from $169.99 (the supposed MSRP). Yet the consumer can still buy those knives at Kohl's regular price of $119.99.
Although the sale price is much cheaper, it is not as big of a discount as the store advertises. Don't be fooled by stores that do this. It's just a trick.
Rebates are very popular, and are simpler than other sale ploys. The true fault comes down to the consumer here. According to an academic paper titled "Managing Mail-in Rebate Promotions" roughly 40% of rebates on consumer electronics get redeemed. For other categories that number is even lower. Consumers need to be aware of deadlines for when they can no longer receive the rebate, and make sure to submit it by that time. Also stated in the fine print, rarely are consumers allowed more than one rebate per household. Don't buy two items expecting to receive a rebate on both.
Store Credit Cards
Store credit cards are just like major credit cards. The difference is that buyers are borrowing from the business instead of the bank. When it comes time to pay the bill there are rates and fees, many times much higher than what a bank would charge.
If the consumer is already used to making credit card payments before the interest and fees are due this may be a good option. However, more often than not consumers pay the bill after interest has accumulated, which will always cost them more money. Postponing the card payment is much like layaway. It can cause an accumulation of hidden fees and, in the long run, will cost the consumer more money. Acquiring many of these store credit cards could make it more difficult to keep track of payment due dates, interest, fees, and costs.
Although the deals can be tough to sort through, with a little consumer intelligence it's easier to make it through the holidays without breaking the budget.
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