Couple Money

The Return of Layaway

layaway payments

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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:

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.

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?

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