It was a happy Saturday for Carmen McKinney as she replayed a ritual she has enjoyed for years. McKinney, 40, picked up an item she had set aside in a layaway program a month ago, just as she has done for 20 years. This time, it was a Dooney & Bourke handbag at Marshall’s.
“It’s a short-term way to get whatever you want without paying all the interest of a credit card,” the call-center manager said.
McKinney doesn’t need layaway — a purchase option that’s so antiquated that many Generation Xers don’t even know what it is — but she sees the smarts of using it.
“For just a $5 fee, you can set it aside, and if you miss a payment, there are no finance charges like a credit card,” McKinney said.
There are indeed things to like about layaway plans: no interest, no late fees, no marring credit histories with a missed payment and little threat of identity theft.
Layaway was pretty much declared dead when large retailers such as Wal-Mart pushed it out the door. Its demise came as a result of the onslaught of readily available credit cards that promised quick possession of purchases.
What had been the most frugal and cost-efficient method of making a purchase was passe.
Monthly minimums on a credit card made items seem more affordable, even if the ultimate interest rate meant you could have bought two.
“Most people still don’t see it as a legitimate option since many stores don’t offer it, but it seems to be making a slight comeback,” Britt Beemer of America’s Research Group said of layaway.
About 6 percent of consumers surveyed last month said they would use it, Beemer said.
Some retailers never abandoned the idea. Kmart has been a perennial offerer of layaway, and jeweler Shane Co. still logs a lot of business that way.
“It was something our customers said was important, so we didn’t want to walk away,” said Kim Freely, spokeswoman for Sears Holding Corp., which owns Kmart and whose Sears stores will restart layaways Sunday after a two-decade absence.
Rordan Shane of Shane Co. said that with credit being so tight, using layaway takes away the worry of maxing out a credit card.
“Your credit score is never touched,” he said.
Kmart’s plan is easy: $5 to start and eight weeks to pay.
One catch: After Sunday, home electronics over $200 will be ineligible for layaway.
But you can get just about anything else via layaway, and several savvy businessmen see the value of offering it on everything from vacations to the down payment on a house.
“People are pleasantly surprised that they don’t have to pay for an entire vacation upfront,” said Marty Seslow, vice president of sales and marketing at .
So why not simply save up?
“I was once savings-challenged,” said Robert Holland, owner of Lay-Away.com, where business has surged by 25 percent this year. “If I had the money put aside in my savings, it was too easy to transfer to checking and spend it.”
David Migoya: 303-954-1506 or dmigoya@denverpost.com
Layaway logistics
Layaway plans have been around for years, but they are not as prevalent today. Here are a few things to keep in mind when considering a purchase through layaway.
• Be sure the item is actually set aside. Some retailers provide replacements if an item is sold out or not in stock.
• Check for hidden fees, such as on returns or cancellations. They shouldn’t be more than $10 or $20.
• Do the math. A $500 purchase on layway can cost as little as $505 at some shops. On a credit card with 18 percent interest, it’s $515.07 if paid off in three months.
• Know how refunds are handled. Some retailers offer only in-store credit while others provide cash.
• Though many stores restrict the practice, some consumers still use a credit card for layaway purchases. Don’t.
• Online purchases should be through established businesses and on secure networks. Check around.
— David Migoya
