Layaway: Not A New Idea

Layaway: Not A New Idea

Layaway is not a new idea.  In fact, it was first introduced to consumers around the end of the 19th century as a popular way to sell products to customers who do not have the cash on hand to purchase them outright.  With a small down payment, followed by a series of payments, the customer could get their product over a period of time.  Layaway peaked in popularity during the Great Depression when unemployment rates were high and disposable income was severely low.  The layaway customer does not get the item until it is completely paid for.  There is sometimes a fee associated with the layaway purchase since the seller must place the item in storage until the payments are completed. It is interesting that layaway purchases are most common in the purchase of jewelry and other luxury items.

Last year at this time Sears and Kmart helped customers rediscover the old fashioned concept of layaway purchases.  It is estimated as a result of a recent holiday poll that there are 13.5 million consumers still carrying debt leftover from last Christmas 2010.  Besides Sears and Kmart, major retailers such as Toys R Us, Babies R Us, TJ Maxx, Marshall’s, and the Burlington Coat Factory have started to offer layaway programs.  Usually the time frame for a layaway is 30 to 90 days with a minimum of 10% or 20% down.

The consumer needs to understand the terms of his or her layaway purchase.  For example, at the Burlington Coat Factory layaway deposits and payments are non-refundable, but may be converted to a gift card if the layaway is cancelled.  In addition, the company won’t give you a refund if you decide to return the item you have paid for in full.  It will only give you a gift card.  A second note of caution is one where the item goes on sale after the item has been placed in layaway.  Many retailers will make a price adjustment only during a period of 7 days from the date of purchase and/or when the item has been placed in layaway.

So why do a layaway at all?  One of the main reasons is to avoid the use of a credit card and the associated costs for interest each month.  The layaway plan typically has minimal or no fees, making it less expensive than carrying the balance on a credit card.  With our troubled economy, many stores see the layaway program as a way to attract customers; however, many stores offer a layaway program only during the holidays.  Online layaway is becoming popular and is available through a company called ELayaway.  This is a Florida based company that handles layaway programs for up to 700 online retailers including Best Buy.  I think this program definitely has merit; but like all debt, one has to evaluate their purchases as part of an overall spending plan for the holidays.

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Written by
Donald Wittmer