Layaway Plans Making a Comeback

Consumers are embracing once-outdated layaway plans to help them budget for holiday shopping.

Skinny jeans are back in style, so why not layaway plans? This holiday shopping season, retailers are getting back to the basics by offering their customers interest-free installment plans.  Here's the skinny on this nearly forgotten method of purchase.

Blast from the past

Shopping early offers more than a better gift selection; if you pick your stores right, you'll get interest-free financing, too. And Kmart is running a new ad campaign to make sure you know all about it.

Retail layaway programs allow you to put merchandise on hold while you make periodic, interest-free payments. Once the payments total the purchase price, you can take the merchandise home.

These installment programs were largely forced into obsolescence some years back, with easy access to credit that plastic provided. When consumers had ample revolving credit, they could pick out their items and take them home that day-without having to make a cash deposit or return to the store to make payments. While retail layaway is often less expensive than credit card financing, it was branded as less convenient. Demand declined, and retailers reacted by discontinuing their programs. Wal-Mart's retail layaway was one of the last to go, ending back in 2006.

Kmart has continued its layaway offering, however, and has even convinced sister company Sears to initiate its own temporary retail layaway revival. You can also find programs at local merchants or through online retailers, like eLayaway.com, EZ-Layaway.com, and Lay-Away.com

Make way for layaway

Kmart's program gives you eight weeks to pay for your goods. You must pick out your merchandise, take it to the layaway counter, and leave a cash down payment. The minimum is either $15 or 10 percent of the purchase price, whichever is more. There's a $5 service fee, plus a $10 cancellation fee. You then drop by the store every two weeks to make another payment. Eight weeks later, your stuff is paid for and you take it home.  

Sears' holiday season layaway terms are slightly different. The down payment is the greater of $15 or 20 percent of the purchase price, and the merchandise must be paid off and taken home by December 23. Also, Sears doesn't have a layaway counter, so you take your goods right up to the nearest cash register.

The $5 service fee increases the cost of the merchandise, but it may be cheaper than rolling over balances on a credit card.   

While the return of skinny jeans is largely unexplainable, layaway's comeback is definitely a sign of the times. Amid extreme economic uncertainty, consumers are moving away from the charge-and-spend mentality that dominated American retail for years-especially if they don't really have the money they're spending.  Businesses will have to find a way to adapt to these new circumstances. The folks at Kmart and Sears undoubtedly believe that offering layaway might be one way to do just that.