BBB: Layaway and Gift Cards

November 2, 2011 4:29:00 AM PDT
The Better Business Bureau gives us tips on how to use layaway, and the most valuable gift cards for the holidays.

Layaway Now for Later: BBB Advice on the Layaway Process

The current economy has left many shoppers on a budget and searching for more affordable methods of paying for big-ticket items and holiday gifts. This holiday season, many families will be turning to alternate forms of payment to make ends meet. With many stores offering layaway services, Better Business Bureau is offering advice on how to use this payment plan in lieu of credit cards.

Once considered a dated, old-fashioned method of payment, layaway services are back in a big way, with many businesses now shaking the dust off their layaway programs for today's beleaguered consumers. Buying items on layaway is different from putting them on a credit card because the buyer isn't charged interest on the purchase and can't take the item home until it is paid off. When purchasing items on layaway, the buyer must typically make a down payment of 10 to 20 percent and pay any service or plan fees for the store to hold the item for them. The customer then has typically 30 to 90 days to make periodic payments to pay off the balance. Once it is paid off, the customer can take the items home.

"Layaway services can be a great alternative to the using a credit card," said Steve J. Bernas, president and CEO of the Chicago & Northern Illinois Better Business Bureau. "However, it's extremely important that customers take note of the fine print and know what to expect."

As a complement to in-store layaway, some stores provide online layaway services for purchasing items through the retailer's website. Additionally, third-party businesses have sprung up for the purpose of setting up layaway plans online between customers and retailers that don't already have a layaway program. Customers make periodic payments to the third-party layaway service provider. Once the item is fully paid for, the business then buys the item from the retailer and ships it to the customer.

When buying items on layaway, BBB advises consumers to get everything in writing and offers the following checklist of questions to ask:

How much time do I have to pay off the item?
When are the payments due?
How much do I have to put down?
Are there any storage or service plan fees?
What happens if I miss a payment? Are there penalties? Does the item return to inventory?
Can I get a refund or store credit if I no longer want the item after making a few payments?
What happens if the item goes on sale after I've put it on layaway?
Does the retailer or third-party layaway service have a good BBB rating?

For more advice on how to be a savvy consumer this holiday season, visit www.bbb.org

Guide to Gift Card Giving: BBB Advice for Purchasing Valuable Gift Cards

With the holiday season right around the corner and the economy putting the squeeze on budgets, many shoppers are going to be looking for the best gift options this holiday season. For those looking to give gift cards to family and friends, BBB is recommending that you do your research before purchasing a gift card.

So far, in 2011, BBB has already received more than 440 complaints against the gift card industry, a huge increase from the 33 complaints received in 2010. In some cases, consumers are disgruntled when they are given an expired gift card with loaded cash that isn't usable until the expiration date is corrected. After sending the expired card in for replacement, the consumer is left empty handed when the card fails to ever return to them.

"Consumers need to be on the lookout for gift cards that appear to be 'open' or out of their original package, and cards that state an expiration date that is coming up or that has passed," said Steve J. Bernas, president and CEO of the Better Business Bureau. "Shoppers should be wary of online auction sites that promise 'full value guaranteed' gift cards. It's sites like these that are prone to selling old, valueless cards that leave the gift giver and receiver distraught."

BBB recommends the following tips for both givers and receivers of gift cards:
Know the rules. New federal rules that took effect in August of 2010 are designed to protect consumers, and will restrict fees and affect gift card expiration dates. These new rules apply to two types of cards: Retail gift cards, which can only be redeemed at the retailers and restaurants that sell them; and bank gift cards, which carry the logo of a payment card network like American Express, Visa, or Mastercard and can be used wherever the brand is accepted.

Check it out. Make sure you are buying from known and trusted source. Always check out a business at www.bbb.org http://www.bbb.org. Avoid online auction sites, because the cards sold there may be counterfeit or may have been obtained fraudulently.

Read the fine print before buying. Is there a fee to buy the card? Are there shipping and handling fees for cards bought by phone or online? Will any fees be deducted from the card after it is purchased?

Inspect the card before buying it. Verify that no protective stickers have been removed, and that the codes on the back of the card haven't been scratched off to reveal a PIN number. Report any damaged cards to the store selling the cards.

Provide the receiver with back up. Give the recipient the original receipt in case the card is later lost or stolen. Also, before you buy retail gift cards, consider the financial condition of the retailer or restaurant. A card from a business that files for bankruptcy or goes out of business may be worthless. If the business closes a store near the recipient, it may be hard to find another location where the card can be used. A business that files for bankruptcy may honor its gift cards, or a competitor may accept the card. Call the business or its competitor to find out if they are redeeming the cards, or if they will do so at a later date.

Treat the gift card like cash. For receivers, it's important to report lost or stolen cards to the issuer immediately. Some issuers will not replace cards that are lost or stolen, while other issuers will, for a fee. Make sure to use gift cards as soon as possible, because it's not unusual to lose or forget about them. For more consumer tips you can trust, visit www.bbb.org


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