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Alternative to Credit Cards: Layaway Programs

This article was written by in Consumer. 7 comments.

It must be a sign of the times. This year I’ve seen at least one commercial advertising a retailer’s layaway plan. These have been out of style for at least as long as I’ve been an adult consumer. The theory is that rather than paying up front for a large item, a Christmas gift for example, with cash, you can offer the store a deposit and the store will hold the item for you.

Every week, you can continue making payments until the item is paid in full; at this point, you can take the purchase home. There may be a small fee to participate in a layaway program, but the store does not charge interest. As Kimberly Palmer from US News & World Report notes, if your layaway purchase is a holiday present for your children, having the store hold the gift while you make your payments would make it more difficult for the intended recipients to discover their hidden present.

Layaway seems to be a reasonable solution for making large purchases without credit cards. The fees are low and customers won’t get trapped into debt. In a retail environment when supplies of the most popular items can’t match demand, it’s an advantage to have the ability to reserve your purchase ahead of time while you pay over time.

Not every retailer thinks this is a profitable plan. Wal-Mart and a few other stores refuse to participate in layaway programs. If you plan on shopping at K-Mart, TJ-Maxx, or Marshall’s, layaway programs will be available.

Layaway Programs Come Back Into Style, Kimberly Palmer, US News & World Report, October 28, 2008

Published or updated October 30, 2008. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 7 comments… read them below or add one }

avatar Ellen

I’ve seen the K-Mart layaway program ads for the past few weeks. I thought it was really interesting, and actually had a friend ask me what layaway is. Clearly people are looking for alternatives to credit cards with the current crisis.

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avatar Raj

Thanks for bringing up this latest trend in the midst of our economic crisis. I agree with you that layaway can be a sensible choice, especially when the alternative is to rack up credit card debt that cannot be repaid. I was wondering about your thoughts on stepping back even further from the problem and looking at shopping habits in the run-up to the Christmas season. At my work we’re trying to design a product that effectively gets people out of debt and many are concerned with teaching the right values to their kids at a time like this. Should children be taught about layaway and its place in responsible money management, or does that spoil the holiday fun for the kids?

All the best,

Raj Patel

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avatar Evan

I don’t get the trend…couldn’t this same person set up a high yield savings account, pay NO fees, and then just buy the item outright later on? I just did this for a vacation for the wife and I…I figured out the weekly payments and we just saved X amount per week for X weeks and when the bill is due in Nov. we will pay it…and caught some interest along the way.

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avatar Miss M

There was a wall st journal article on the return of layaway last week, can’t seem to find the link right now. I thought layaway was dead, it was on its last legs when I was a kid. They think it will become more popular as credit cards become harder to get and Kmart is really banking on it for the holidays. I call it credit without the instant gratification.

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avatar shadox

well, it’s certainly better than accruing debt for consumer purchases – but isn’t this a major hassle? Why not just save the money in the bank until you have enough for the purchase? Save the lay away program participation fee, earn some interest on your savings, save the hassle of weekly payments… that is unless the item you are purchasing is in short supply and you are worried about it not being in stock later.

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avatar Emily

It’s interesting that layaways are making a comeback. It worries me, though — one of the main reasons why we’re dealing with this economic crisis is because people lived above their means and spent money they didn’t have on credit (or a mortgage) and then realized they couldn’t pay it off. I feel like people could go into a layaway with the same attitude — that it’s OK to buy things you can’t afford, because you can just pay it off later. But perhaps it is safer than a credit card with a crazy high interest rate….I just think there needs to be more focus on saving money rather than spending first and paying off later.

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avatar T. Wilkerson

I currently bank with SunTrust and am completely fed up with their shenanigans! The overdraft fee conspiracy has happened to me way too many times with the most recent being this week. Some of the banks have the new ATMs out where you can deposit cash without needing an envelope. Well, with Wells Fargo, the cash deposits go directly into your account. This is apparently not the case with SunTrust. I incurred $180 in overdraft fees because according to the representative, they have a different “processing system” than Wells Fargo. To me this means that they are purposely rigging your account so that they can charge these ridiculous overdraft fees! I am so fed up with this! What can be done about these banks doing whatever they want with your money?

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