Layaway: Do Your Holiday Shopping Without Credit Cards
The credit crisis and shaky economy are forcing us to change our spending habits. As credit card companies roll back card limits and the majority of us keep watching our wallets, weâ€™re moving away from the days when we just kept racking up more and more credit card debt, charging anything we wanted but didnâ€™t have money for â€” stainless steel appliances, high-definition plasma TVs, new wardrobes, four-star vacations â€” and going back to actually saving up for our purchases and sticking to things we can afford.
Now, with Christmas just two months away and most of staring at limited holiday budgets, some retailers are offering us a budget-friendly, no-debt alternative to credit cards for our holiday shopping. Discount chains like Kmart and Burlington Coat Factory are reacquainting us with layaway â€” the practice that allows us to put store items on hold while we pay them off in incremental payments with no interest charges added.
Some Marshalls and T.J. Maxx stores, as well as most A.J. Wright stores, also offer layaway as a payment option, and two notable e-merchants have built their business models specifically around offering layaway to online shoppers. Thereâ€™s Lay-Away.com, which features mainly appliances and electronics, and eLayaway, which offers a wider variety of products and allows you to buy items on layaway at more than 1,000 online stores.
Looming Recession Brings the Resurgence of Layaway
Layaway, widespread during the Great Depression, mostly disappeared during the 1980s and â€™90s with the proliferation of credit cards and the economic boom.
â€śLayaway really was a great deal and kind of a way to force people to budget their money,â€ť says Edgar Dworsky, editor of the Internet consumer resource guide Consumer World (â€śLayaway Message Resurrected for Holiday Shoppers,â€ť The Associated Press, Oct. 22, 2008). â€śPeople donâ€™t have the discipline to do that today.â€ť
But as more of us steer away from credit card debt in the current financial environment, the demand for layaway â€” spurred by renewed notions of budgeting and saving â€” has soared. Traffic at eLayaway has skyrocketed by 91 percent over the last year, reports The Wall Street Journal (â€śLayaway is Making a Comeback,â€ť Oct. 22, 2008).
Layaway: How it Works
Each storeâ€™s policy varies, but the general idea is the same: You find something you want; you pay a small layaway fee upfront for the store to hold the item; you make payments little by little; and in a few weeks, the item is yours to take home.
Although layaway is available throughout the year, it can come in especially handy right now, as the holiday shopping season gets underway.
Letâ€™s say, for example, one of your kids is dying for a Nintendo DS, which retails for $130, for Christmas. For $18 (a $5 layaway fee, plus a 10â€“percent down payment), you can put the game system on layaway at Kmart and pay it off over the next eight weeks â€” just in time for Christmas â€” with a $28 payment every two weeks, plus any sales tax.
At eLayway, you can make payments either twice or once a month, and your 1.9-percent layaway fee ($2.47 on the Nintendo DS) plus any shipping and taxes are included in your monthly payments.
â€śI remember growing up with layaway, and it seemed like the fee was reasonable,â€ť 41-year-old John Pace tells The Wall Street Journal. â€śAnd this way I donâ€™t max out a credit card.â€ť
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