As a general rule finance professionals will preach that if you can’t afford it you shouldn’t buy it. It’s a great rule, but realistically not everyone will follow it. Retailers are attempting to keep their sales up by making it easier and easier to pay for items, and it’s not hard to get sucked into these traps if you’re not paying attention. To help you make wiser spending decisions we’ll highlight three financing methods and what you should look out for.

Layaway

With the holiday season upon us, there is often pressure to spend. Retailers aren’t blind to the idea that you may be spending more money than you have on hand during this time of the year. The response for many of them is to provide a layaway program that will allow for you to set the items aside now and pay for them later. However, the fees that may be associated with this service can vary from store to store. Most retailers will require some combination of a deposit, service charges and surrender fees. While the upfront deposit may be as small as $10, and services charges to maintain a payment plan may be another $5 or $10 to administer the payment plan, should you miss a payment or decide not to complete the purchase, your layaway order will typically be canceled and those fees will likely not be refundable. There may even be an additional fee assessed for surrendering your order.

Even worse than the fees are the buying minimums that may be associated with this service. Some retailers require you to purchase hundreds of dollars of merchandise to qualify for layaway which ends up forcing you to spend more than you normally would. This is a pitfall that can have lasting impacts on your budget. Before you use layaway ask yourself if you really need what you’re purchasing. If the answer is yes, find a retailer like Walmart with minimal fees and a low minimum purchase requirement.

Rent-to-Own

Please just don’t do this. Rent-to-own, from a retail perspective will almost never pay off. Sure, their payment terms may be flexible and there are no embarrassing credit checks, but you are paying a premium for that service. The problem with consumer goods like televisions and furniture is that you will always need/want to replace them, but when you’re locked into a payment plan on a couch that your cat has already destroyed, it’s just not worth it. It’s hard not to want to live a certain lifestyle, and we all want to make our homes our sanctuaries, but you can do so over time when you can afford it. Consider hand me downs and craigslist purchases before you entertain the idea of rent-to-own. Those rental retailers will put you on a payment plan that will have you way overpaying for your lifestyle.

Payment Plans

I’ve been seeing these payment plans pop up everywhere nowadays which frankly disturbs me as a finance professional. As if credit cards weren’t enough of a problem, now we have payment plans incentivizing consumers to make purchases we can’t afford. Unfortunately, that means the onus is on us to understand the details of these plans and make our decisions accordingly. One example that I came across recently was the new iPhone via Verizon Wireless. Verizon used to offer discounted iPhones with an extended cell phone contract, but those days are long behind us. Today, the iPhone X, which costs nearly $1,000, is available through Verizon at full cost or if you can’t afford that, you can purchase it for $46.66 a month for 24 months. That doesn’t seem so bad. When you do the math, it comes out to be essentially the same price. However, when you actually get to check out, it estimates your monthly payments at $56.66. While a Verizon representative was quick to tell me this was just sales tax, after pressing them a bit harder they admitted that it was actually a $10 per month service charge to administer the payment plan. That’s an extra $240 for that already overpriced phone!

The Bottom Line

Draw a distinction between what you need and what you want. If you do feel you need to use one of these financing options, educate yourself and read the fine print. These services are available ensure you’ll buy, but only you know if you can truly afford to make that purchase.

Written By: Lindsay Dell Cook

Lindsay Dell Cook is a CPA, finance writer, and founder of Budget Babble. She lives in Philadelphia with her uber supportive husband and adorable daughter. When she's not working, she enjoys spending time with her family, taking their lovable mutt for walks, or reading a good book while buried under a pile of cats.