You've probably already seen the commercials for it on TV—shop for your Christmas presents now and pay for them a little at a time over the next days, weeks and months so that when the holidays actually arrive your presents are paid for. It's called layaway and it's nothing new. According to reports it was created during the Depression era, but popularity subsided when credit cards became en vogue. Now it's making a resurgence as a way for consumers to buy something they can't afford without having to use plastic. But is layaway a good idea?
Walmart Reinstates Layaway
Walmart believes layaway is a good idea. At least now they do. According to Marketwatch the company did away with layaway in 2006, except for jewelry, but they're bringing it back for this holiday season. “The purpose is to address our customers’ requests,” Chief Merchandising Officer Duncan Mac Naughton told MarketWatch. “Our customers are still struggling. There’s a fragile economy. They need our help. We really think this is an opportunity for our cash-paying customers.” According to Marketwatch, 55% of Walmart's customers pay with cash.
Other Retailers Promote Layaway
Besides Walmart, many other big box stores are continuing to use layaway. These include Best Buy, Marshall's, TJ Maxx, Kmart, Toys "R" Us, and Sears. Most of the stores offer similar layaway policies. A down payment, typically of 10 to 20%, is required, plus a small service fee. In Walmart's case the service fee is $5. If the merchandise isn't picked up by a certain date, December 16 in Walmart's case, there is a $10 cancellation fee. Kmart offers an 8-week payment plan or a 12-week payment plan. The service fee for the 8-week plan is $5, and for the 12-week plan it's $10. Cancellation fees are higher at Kmart as well-- $15 for the 8-week plan, $25 for the 12-week plan.
Another Way to Spend More Than Necessary
While it may not carry the stigma of credit cards, some feel that layaway it just another way to get consumers to spend more than they should around the holidays. "Layaway is a terrible idea," says Elik Aaron of SaleRacks.com. "In the end, you are going to pay
more than you expected because you think that you can just use the layaway on a ton of items due to the fact that you don't have to pay the balance of all of them at once." Aaron suggests planning ahead, saving money and waiting for sales. Through layaway you may not get to take advantage of the best prices the retailer will offer throughout the holiday season.
Majority of Consumers Supportive of Layaway
According to a survey released by ConsumerSearch.com, fewer than half of those polled have used layaway previously, but nearly three out of four are open to it. Forty-two percent responded that they expect to use layaway specifically for holiday gifts. Of those polled, nearly half had used layaway and 96-percent of those that had enjoyed the experience. Kmart was the store used for past layaway purchases and one out of three people said they were glad stores were bringing back layaway. “Many shoppers remember layaway positively from the past and are pleased that companies are bringing it back for the holidays. Perhaps more importantly, consumers recognize layaway as a potentially effective money management tool,” said Christine Frietchen, editor-in-chief of ConsumerSearch.com in a news release. “As our survey results show, layaway will likely make a big difference to a number of shoppers this holiday season, especially as people face smaller budgets and look for ways to spend their money as wisely and effectively as possible.” Bargain hunter and writer Marcia Layton Turner says it's a good option for consumers who want to avoid debt. "Being able to spread out payments in advance helps with budgeting and eliminates the dreaded holiday bills once January rolls around," she says. For Americans like Julie who have filed for bankruptcy or watched their credit scores plummet, layaway is a good option around the holidays and for budgeting in a larger purchase. "It is a wonderful feeling to pick up your purchases and to not have future debt hanging over your head," she says. "It also creates an opportunity to purchase an item that may not be there if you have to wait months while saving for it."
