eLayaway

Layaway programs can be useful, but check the fine print

Layaway is back in vogue.

The old-fashioned retail practice of putting a down payment on a purchase and then paying for it over time has seen a resurgence in the last couple years, thanks mostly to — you guessed it — the downturn in the economy.

What was once a big practice in the 1960s and 1970s had pretty much fallen out of vogue by the 2000s. But now a number of retailers are pushing layaway programs again in hopes that it will entice worried consumers to come into their stores.

According to a 2008 Consumer Reports survey, an estimated 7 percent of shoppers planned to use layaway for holiday purchases.

Kmart, which started promoting its layaway program heavily last year, said its program saw double-digit increases in customers and sales in 2008. And, according to the company, the U.S. Web searches of the word “layaway” doubled from August 2008 to August 2009.

This year, Burlington Coat Factory, Marshalls, T.J. Maxx, Toys R Us and other retailers have joined Kmart and Sears in promoting long-forgotten or new layaway policies. Layaway can also be used for some online purchases with the help of third party sites like eLayaway.

But while layaway can be a useful debt management tool to use instead of credit cards (there are no interest payments like with credit card purchases), consumers should understand exactly what they’re getting into, says Consumer Reports.

The Better Business Bureau recently created a checklist of questions to ask before starting a layaway program with a company. I’ve detailed some of them here and added a few others. The best thing to do, however, is to get the layaway policy in writing.

• How much time do I have to pay off the item? The usual time frame is 30 to 90 days, according to Consumer Reports.
• When are the payments due? There is often an initial payment of 10 or 20 percent of the price of the item(s). After that, it depends on the store. Some require weekly or bi-monthly payments, while others let you set your own pay schedule.
• Are there any storage or service plan fees? Again, this depends. For instance, Toys R Us has a $10 fee, while Kmart and Burlington Coat Factory charge $5.
• What happens if I miss a payment? Are there penalties? Does the item return to inventory? Some stores will have you make a double payment the next time, or they may return the item after a certain number of days.
• Can I get a refund or store credit if I no longer want the item after making a few payments? There is often a cancellation fee, such as the $5 fee Burlington Coat Factory charges. That store says that layaway deposits are non-refundable, but that it may give a store gift card if a layaway item is canceled or returned.
• What happens if the item goes on sale after I’ve put it on layaway? It’s important to check the store’s policies on honoring price adjustments. For instance, Sears gives customers a 30-day window on price adjustments. Kmart gives only a seven day window. Kmart allows only one price adjustment per item, and won’t accept price adjustments on seasonal or clearance merchandise.
• When does the item need to be paid off in order for me to have it for Christmas? For instance, Toys R Us requires that items be paid off by Dec. 6 in order to ensure that they can be picked up in time for Christmas.