Personal Finance and Investing

Older shoppers remember layaway plans when they were regularly used by consumers. Then credit cards came into existence and stores and consumers both embraced them. A sale could be completed and the buyer able to walk out of the store with the merchandise in hand. Layaway opportunities became less available as credit card usage increased.

Now there seems to be a revival in layaway plans as consumers avoid accumulating debt. Some of the largest retailers, like Kmart, Sears, and Toys “R” Us, are bringing back layaway to attract scarce consumer dollars. The plans vary with some stores limiting what can be placed on layaway to big ticket items. This enables consumers to purchase the more expensive items that they would not be able to buy otherwise.

Credit cards are still by far the primary payment form, but it is expected that layaway will account for up to 11 percent of payment methods used by consumers. For those who don’t know, layaway allows a shopper to have the store hold merchandise until all installment payments have been made. There is sometimes a onetime small service fee but many stores offer the service at no cost.

The one requirement is that the buyer must pay a certain amount towards the amount due according to a payment schedule set by the store. A missed payment will get the merchandise returned to the store shelves. Most layaway plans require the account to be paid in full in less than 90 days. You don’t get to take the merchandise home until it is paid for.

One of the main reasons layaway is making a comeback is due to the economy. With retailers facing a dismal holiday shopping period, the stores want to do everything they can to move merchandise and lure shoppers. Many Americans are unemployed or are dealing with reduced household income. They are either trying to reduce their debt level or avoid new debt all together.

In fact, credit card balances have fallen for 11 consecutive months as of August. Layaway lets a consumer avoid paying the exorbitant interest rates and fees associated with credit cards.

Not all stores offer layaway though. The plan requires paying an employee to handle transactions and merchandise. In addition, the store must set aside space for merchandise storage. A third drawback to layaway from the retailer’s viewpoint is that buyers can change their decision to purchase the products. That means store merchandise that might have been sold from the sales floor was not available while on layaway.

Some stores have been offering layaway for many years. These stores include Citi Trends, Burlington Coat Factory, and Marshalls. All three stores report that layaway sales have increased this year.

Consumers have certain rights when buying on layaway. For example, you are entitled to get a written agreement and in most states you can get a certain percentage of your money back if the sale is cancelled. Each state has different layaway laws. It’s important to know the law and protect yourself by making sure the retailer follows all its requirements.

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