It seems that fashion trends always come back, so it shouldn't be a surprise that layaway plans have returned. For those who use a cash-only policy, layaway can be a great way to buy both high-dollar necessities and luxuries.
What exactly is layaway? It's a retail plan that allows you to make monthly installment payments on big-ticket purchases. Usually there's a down payment, plus a small fee, to hold the item in the storeroom. Once the item is "paid in full," you get to take it home.
Layaway first became popular during the Great Depression when people lacked money to buy merchandise outright. But as "buy now, pay later" became the norm, layaway lost its appeal. By 2007, Kmart claimed to be the only major chain still offering the option, with 3.2 million customers using its plan.
Consumer Reports says it "applauds" the return of layaway plans, noting that they "were great because they instilled discipline - you couldn't have what you couldn't afford." The consumer watchdog notes that the sluggish economy has generated renewed interest, with many major department stores and discounters again offering plans. Walmart, for example, started offering layaway during the 2011 holiday season, and industry experts expect the program, if successful, to become available all year.
Here are some of the benefits of layaway that customers are rediscovering:
- It saves you money by avoiding store credit card rates that can exceed 20 percent.
- It helps you afford higher-quality items that provide more durability and desired features.
- It locks in the price and ensures the availability of items you don't need yet, such as seasonal clothing, furniture for your new home, an engagement ring - or even a crib for a new baby on the way!
As a smart shopper, make sure you read and understand the plan's requirements, including any cancellation fees, and keep detailed payment records. Check with the Better Business Bureau to ensure that the retailer is in good standing. If it closes its doors, you could lose money already paid.
Today, layaway is no longer limited to brick-and-mortar stores. Online shoppers can now take advantage of options such as elayaway.com, which provides plans for dozens of well-known retailers that sell clothing, electronics, mattresses, housewares, appliances and other merchandise.
The start of the year is also a good time to check with your bank to see if it offers a holiday savings club, another traditional layaway-style savings plan. The accounts earn a small amount of interest, but the main advantage is that you'll have cash in hand by December for buying gifts, helping you resist the temptation to run up credit card bills.
The adage: "Good things come to those who wait" is certainly true with layaway where patience and discipline can pay off.