The Return of Layaway

I remember being a little kid and my mother putting items on layaway at Sears (mostly those Toughskin jeans). She would pay a small amount up front and then would make regular weekly or monthly payments until the total amount was paid off. Sometimes there was a small “layaway charge,” and I can understand why. The store had to keep layaway items in storage and had to maintain the liability for those items. In times past, layaway was a savings account of sorts but it did keep the giant credit monster at bay. With the current “credit crisis” swallowing up entire newscasts and the thoughts of far too many Americans, I predict people and businesses will see the wisdom of layaway and it will make a strong comeback this Christmas season.

Layaway offers an alternative to credit cards and with shrinking credit limits, fewer specialty card promotions (zero interest, 180 days same as cash, etc), and the looming credit crisis, many consumers may not be able or willing to use credit this holiday season. If you’re spooked by the sagging economy and are either already in too much debt or determined not to be, layaway may be an enticing option.

I’m not alone in my prediction. Kmart is touting its 8-week Layaway program, and while there are some restrictions, I think layaway is a great way to learn and teach discipline!

Here are some of the details on Kmart’s layaway program:

Layaway Fast Facts:

• A Layaway contract is eight (8) weeks.
• The Service Fee on all new Layaway contracts is $5.
• The Cancellation Fee on all new Layaway contracts is $10.
• The Service Fee plus Cancellation Fee, or 10% down payment (whichever is
  greater) is collected when merchandise is put into Layaway.
• The bi-weekly payment schedule for all new Layaway contracts is 25% of the original
  balance due.
• As long as the payments are made on time, the merchandise will be held for you.
• Layaway merchandise will be returned to stock seven (7) days after a missed payment.
• If Layaway merchandise is returned to stock, you are eligible for a refund minus Service and Cancellation Fees for a one year period

TJ Maxx is another retailer offering layaway options. With a 10 percent down payment, you have 30 days to completely pay for your merchandise.

Sears offers layaway as does Burlington Coat Factory. These companies, along with Kmart and TJ Maxx, are rolling out fairly aggressive marketing plans to push layaway as an alternative to using credit cards, though the irony is that they will accept credit cards as layaway payments. Isn’t that defeating the purpose?

One thing I’ve learned as a business manager is that you never want to limit your customer’s options when it comes to transferring money from them to your business, so I guess allowing credit card payments makes sense from the business’s perspective, but from the consumer’s perspective it doesn’t make any sense.

Back in high school, my mother was known for selecting a few items she wanted and putting them on layaway. One year for her birthday, my brother went to the store and bought a few items she wanted out of layaway. She was thrilled when she opened her gifts and remarked that she had been “wanting a sweater just like this!” She said she thought it was on layaway but my brother revealed what he had done. It was quite smart actually, he paid less than full price and got her something he knew she wanted!

How do you plan to take the sting out of Christmas expenses this year? Next year, you really should open a savings account to handle this expense. Do you plan to use layaway this Christmas season to reduce your credit exposure? Have you saved money all year or do you plan to make extra money with a temporary job?

Note: This post was included in the at The Sun’s Financial Diary. Thanks!

photo credit: gusdrinks

[tags]layaway, lay away, credit, Sears, Kmart, TJ Maxx, business, discipline, marketing[/tags]

Tagged as: Business, Credit, discipline, Kmart, lay away, layaway, marketing, Sears, TJ Maxx