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Layaway Is Coming Back

Layaway—the way to purchase big ticket items in weekly or monthly installments before taking possession of the merchandise—is making a quick comeback at U.S. retailers in advance of the 2008 holiday season.

As creditors reign in credit limits and consumers become less inclined to go into more debt, layaway may be an ideal solution for retailers and shoppers alike.

How Layaway Works

When you buy something on lay away, you pick it out at the store and “lay it away” until you have paid for it. Say you want to buy a new TV before Christmas that costs $800, but you only have $200 to spend this week.

You pick out the TV you want, put down a $200 deposit, and the store sets it aside for you. Then, either you send regular payments each week or month until you have paid for the TV, and you go pick it up.

Layaway is the same as saving up for the item you want—only with the guarantee that an item on store shelves now will still be there for you come Christmas. It’s a bit of instant gratification now (because you can shop now), without the debt hangover and associated interest payments.

Where to Layaway

While many big box retailers offer in-store layaway (see KMart’s layaway program), a new service called eLayaway will let you layaway merchandise at hundreds of online merchants.

What Layaway Costs

Typically, layaway is much more affordable than using credit to purchase a big ticket item—especially if you plan to pay for your purchase over many months.

KMart charges a flat $5 layaway fee, and there is a $10 fee if you cancel ($15 or 10% of the item price is collected as a down payment; if you pay for the item the $10 cancellation fee is applied to the purchase price.) eLayaway charges a 1.9% transaction fee, or $1.90 per $100 purchased, and has a $25 cancellation fee.

Have you used layaway? Would you use it if it became widely offered again?

About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.

Comments

  1. Layaway is definitely better than using a credit card, but any time you buy something before you have cash in hand to pay for it, you can get in trouble. I am a strong believer of buying things outright. If you can’t afford it now, you probably should buy it. Of course there are exceptions to every rule.

  2. I completely fail to understand why you would do this instead of just saving for it yourself – you skip the fee, and you earn interest in the meantime.

    It seems like it’s something that used to make sense when items at a store were more unique – ie, in the 30′s at a dress-shop where if you just waited it might be gone – or when women did most of the shopping but had less access to safe vehicles for saving. But now… it doesn’t seem like either of those are likely to apply for the vast majority of people (I hope, in the case of the later)!

    Anything I’m missing?

  3. I remember my mom using this all the time when I was a kid. In one specific instance I helped to pay for a new bike. She would take me grocery shopping with her and we’d always stop by the layaway area to see my new bike and put more money toward it. It felt like forever until I got my bike but it really helped me learn patience and the value of money.

  4. Layaway works great for hot items, like the latest and greates toy. You can get it, lay it away and put it under the tree. They could be gone by the time you saved for it.