The Return of Layaway

By Admin | Oct 27, 2008

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Hombre GalletaI 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!

Creative Commons License photo credit: gusdrinks

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15 Comments so far
  1. TParkerson October 27, 2008

    Love lay-away!! Worked at Kmart when I was in college…they paid in cash. About this time every year, they had an employee shopping night and you could get a great discount on anything you bought or put into lay-away. Probably the most organized I ever was!! Smart on their part too…we got paid weekly in the break room which was right next to…you guessed it, the lay-away!

    Anyhow, I was very sad to see store phasing it out…local Walmart did away with it a year ago. I too think you’ll see more of it coming back and I will use it when it does!!

    Ron 's reply:
    October 27th, 2008

    #TParkerson→
    Thanks! We used it several years ago when we wanted to buy a very large tent. It was so easy to just swing by the store and pay a small amount … interest free!

    I think stores would get a lot more interest if they extended it beyond 30 to 60 days but their storage problems would probably become enormous.

  2. GiGiG October 27, 2008

    I agree. A savings account is ideal, but if it’s too late to start one, layaway is a perfect solution. If your retailer of choice does not have a layaway option, you can always apply for a 0% intro rate credit card for purchases. This takes responsibility and you might spend more than anticipated, so set your budget and stick to it. Also, remember to come up with a plan to pay off your credit card by taking the total balance and divide it by how many months you have until the Intro rate ends.

    Consumer debt is usually accumulated during the holiday season–be smart about your money.

  3. fivecentnickel.com (3 comments.) October 27, 2008

    Interesting. Almost exactly two years ago, I wrote about the death of Wal-Mart’s layaway program. Funny how things come full circle.

    Ron 's reply:
    October 27th, 2008

    #fivecentnickel.com→
    I bet they bring it back! Funny how tightened credit has caused some major retailers to tout their layaway programs.
    Kmart is using it as the focal point of their latest marketing campaign. Of course, not that Kmart has been the leader in anything for the last 30 years …

  4. Writer's Coin (3 comments.) October 27, 2008

    A friend of mine brought this up the other way and he was shocked because he hadn’t even heard the word in so long. Looks like a lot things that people thought were “dead” are coming back when times are this tough.

  5. Carnival of Personal Finance - Financial Armageddon Edition! | Master Your Card October 27, 2008

    [...] The Wisdom Journal is predicting that layaway is going to make a comeback. With ‘easy credit’ becoming a thing of the past, I think he may be right! [...]

  6. Matt @ Steadfast Finances (1 comments.) October 28, 2008

    I’m with you when you say the major retailers will be reviving their layaway plans. I can remember Wal-Mart, pro-layaway petitions being hyped after the decision in 2006 to remove them, only to see Wal-Mart break into the credit card business. Of course, they were looking into becoming a financial institution at the time.

    I’m betting all the major retailers bring layaway programs back prior to the Thanksgiving shopping season. If you can’t get cheap credit, businesses will be forced back into the pre-credit card economy wouldn’t you say?

  7. Carnival of Personal Finance - Financial Armageddon Edition | My Journey to Millions October 28, 2008

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  8. LP October 28, 2008

    I put toys, clothes and household items on layaway several times. Many, many years ago. When we went shopping…I would then take the kiddies and went elsewhere while hubby put “Santa” in layaway. The little sweeties never knew. :) Also, they never found the Christmas stuff around the house. Now…that’s the best situation ever!I can see where it will be THE thing for the times ahead. No credit cards and cash only will be the ticket!!!! Funny…….it actually used to be the normal!
    God bless America and our Military Troops!!!

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