Blog Post  Layaway? Not exactly.

In her novel Confessions of a Shopaholic, author Sophie Kinsella writes about shopping “you can always find something you want.”

And as many consumers can attest, she’s right. In fact, the average consumer in the United States spends almost $2,000 a year on clothes and services each year and has almost $7,000 in credit card debt.

Consumers typically are encouraged to consider “want” vs “need” when shopping in order to avoid spending outside of their budget and accumulating more debt, especially when many credit cards have high interest rates. But new types of payment methods are gaining in popularity which could change the way consumers shop.

Afterpay allows consumers to “buy” the must-have item they’ve been lusting after and take it home with them before they have paid the full cost. Unlike layaway, where the consumer make small payments over time for an item that stays in the store until the total price is paid off, when using Afterpay, consumers pay ¼ of the total price at the time of purchase, and then make three additional payments in equal installments every two weeks until the item is paid. There is no added cost to use Afterpay at checkout and unlike putting the purchase on a credit card, there is no interest added, as long as you don’t miss a payment.

But if you miss a payment, there are late fees. The first week your payment is late, you are fined $8 and your account is frozen. If you don’t make your payment after 7 days, you will be assessed another $8 fee. Afterpay’s terms and conditions state that a total of up to $48.00 in late fees may generally be imposed per order. However, your fees are capped at 25% of the purchase price so technically purchases that cost less might not have as many late fees assessed because the cumulative total of fees could exceed 25% of the item’s cost. frequently asked questions webpage

This is a similar concept to American Express’ payment option, “Plan It”. If you are an American Express card holder, you can make a transaction (worth at least $100), receive the product, and select an interest-free incremental payment plan. American Express offers you the option of making 3, 6, or 9 equal monthly payments. The plan payments are included in your monthly statement and you can pay on their app. Review their frequently asked questions webpage for more information.

Some Afterpay users, according to a recent article in Glamour Magazine, admit using Afterpay has enabled them to purchase more big items than they normally would have. Consumers should understand that while these payment options are convenient, they can potentially get you in the habit of spending money you don’t have on expensive discretionary purchases. Consumers should remember to be practical when shopping. And consider the following:

• If the item is a “must-have”, plan the purchase accordingly. Review your monthly bills and make sure that your purchase is an added cost that you can afford to pay.
• Review your spending and saving tendencies to see where you could make improvements.
• Consider setting aside money every month until you have a sensible amount saved and budged away. Traditional credit card payments are due monthly, be sure you have the funds to make payments every two weeks.
• Consider traditional layaway options. If you pay with layaway, the amount you are charged with each payment cannot be increased and the item cannot be substituted with lower-priced merchandise. A store must disclose its policy on layaway plans, including cancellation and return (or non-return) of payments already made: https://www.mass.gov/guides/a-massachusetts-consumer-guide-to-shopping-rights#key-terms-to-know.