The Resurgence of Layaway (and eLayaway)

When I think of layaway, I think of two things: baby boomers and big buys. I imagine those primitive, squalid dark ages before credit cards, when consumers regularly paid for serious purchases (technicolor-endowed TV and record players, I'd imagine) over multiple installments. But our current recession has signaled a resurgence in layaway, and a shift in the way consumers use it.

As reported in The Philadelphia Inquirer, more and more buyers are now using layaway for small purchases, like clothing and office supplies. This year's back-to-school season saw a rise in layaway buys at stores like Kmart, which has had a layaway program from 40 years, and began promoting layaway heavily at the start of the recession. Sears, which shares a parent company with Kmart, relaunched its layaway program last November following a 10-year lapse in service.

Laya-what?

Layaway allows customers to purchase items over time with a moderate fee or interest. Shoppers usually select their items in-store and bring them to the layaway counter, where they sign a contract and make a small down payment. After meeting all of the scheduled payments (usually around four over a period of 30 to 60 days), customers can take home the purchases. Layaway began in the 1920s and caught on during Great Depression, but many stores halted their layaway programs in the 1970s, corresponding to the rise in credit cards.

The Details

Stores charge a little extra for layaway—after all, they are reserving the items for you—but the rates are actually pretty reasonable. Kmart, for example, offers plans with $5 fees; consumers give a down payment of about 10 percent of the total price, then pay the rest in four payments over eight weeks. (Download a PDF with all the information here.) The Sears plan (details here) is similar, only with a slightly larger down payment. Both policies charge $10 fees for cancellation.

eLayaway

While researching layaway, I stumbled upon eLayaway, a service that lets you make layaway-style purchases over the Internet. The site charges a 1.9 percent transaction fee for every purchase (so a $100 purchase would cost you an extra $1.90), and you can set it up to automatically withdraw your payments from your bank account. eLayaway has a general shopping service, in addition to sports, health, and travel divisions.

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