The Return of Layaway
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I've been surprised at how much layaway has been mentioned on television recently, especially with Kmart's commercials.
I remember that my grandmother gotten a few items on layaway to take advantage of sale prices and without using credit cards. It seemed like a great option to offer to customers.
I had thought retailers had dropped layaway since it wasn't that profitable. According to a CBS story, the new economic reality is forcing retailers to adapt:
Consumer expert Regina Lewis said, “A lot of us grew up with layaway, and then in the heyday, people in the '90s said, ‘Throw it on my credit card.' Those days are over. Walmart is looking at a landscape when 55 percent of their consumers are now paying cash, and there are clear indications they are living paycheck-to-paycheck, if you're lucky to get a paycheck these days.
How long will this last, I have no idea. I do think some consumers will be taking advantage of the programs.
Big Retailers
From what I noticed Kmart has been promoting layaway the most, but they're not the only ones. Here are some of the big retailers who offer layaway:
- Sears
- Kmart
- Walmart (October 17-December 16 for toys and electronics)
- TJ Maxx/Marshall’s (selected locations)
- Best Buy
- Toys ‘R’ Us
As you may have noticed there are restrictions with some of the programs.
Kmart's Layaway Program
Since these programs look similar, I'm just going to highlight Kmart's policies to give you an idea of how it works. Kmart has a relatively simple program for layaway.
There are minimum purchase amounts with the payback periods. For 8 weeks, you must purchase at least $20 and for 12 weeks you must purchase at least $300.
- Bring your items to the Kmart layaway counter in the store or add to your shopping cart online.
- To initiate a layaway contract you have to make a down payment ($20 or 10% of the purchase price for 8 weeks and $35 or 20% of the purchase price) which includes a service fee ($5 or $10).
- Make your payments every two weeks to stay current.
- Pick up your items after you make your final payment.
It doesn't get much easier than that.
Does Layaway Affects Your Credit Score?
I was curious to see if getting items on layaway would affect your credit score. Consumer expert Regina Lewis answers that question:
People are maxed out on their credit cards and being denied. If you are trying to build your credit, layaway, being responsible with the payments won't help you, but this is key: It also won't hurt you. So unlike applying for or opening a new credit card, it's not going to affect your credit score. That is important to a lot of people.
So if you have bad credit, you should still be able to use layaway at local retailers.
Thoughts on Layaway
On one hand I'm really happy that there are options for consumers like layaway. It decreases the need to use a credit card for purchases. On the other hand, I'm worried that some people will spend more on unnecessary items because they can afford the layaway payments. Then again, people are going to buy what they want, I'd rather they use layaway than get into credit card debt.
What do you think about retail stores brining back layaway for their customers? Do you think you'll use it?
We’ve used Layaway to get birthday gifts, nice thing is, while we are buying them (eventually), they are storing them. We live in a small apartment, even smaller now since our daughter arrived in August, so we don’t have the luxury of storage for gifts in advance, with layaway, we can get the items, pay a small amount each week, and pick it up a week or so before the birthday party. I’m really glad to see that it is making a comeback.
We would never have to use it. To me, it’s like taking out a loan. MHO is if you want something, save up the money.
It looks like Layaway is a great option! It basically teaches people to save up for purchases, albeit in more of a forced way. There is no instant gratification, like with credit cards – there’s the slow build that will hopefully have these people turning to saving.
What’s the difference between making a $20 payment weekly for your kid’s Christmas gifts, or saving the $20 at home and then buying them … It seems like a step in the right direction to me.
I won’t use layaway – I’d rather just save up the funds until I can buy what I want, and not have to pay a fee … but I think it’s a good option.
I think layaway is a great alternative to credit cards, seeing as how you don’t have to go into debt to get the things you want. Sure, it’s not exactly saving up, but you’re still using your money responsibly by making payments.
With subaccounts so easy to create in ING why anyone would pay to set up layaway is beyond me…
One reason mentioned in the CBS piece is for consumer to lock in a lower price as they save up money for their purchase. My guess is not all stores allow you to purchase sales items with layaway so consumer should check each store’s policies.