SACRAMENTO, Calif. - Before every department store issued its own credit card and before everyone's wallet carried plastic, there was another way to get something you couldn't quite afford at the moment: layaway.
As quaint as the sweet-smiling elevator lady who took you up to housewares in the giant department store, layaway is enjoying a practical, albeit limited, comeback during a credit-stressed economy.
The newest innovation offers layaway shopping online. And one major retailer is offering layaway just for the holiday season.
"In an economy like this one, people don't want to rely on credit," said Ellen Davis, a spokeswoman for the National Retail Federation.
Layaway, which involves making incremental payments on merchandise held at the store, offers other benefits during the holiday season, she said.
"Layaway is a great option for parents with nosy kids," Davis said.
National retailers Kmart, Sears and Men's Wearhouse offer layaway all year. Toys R Us launched layaway in October just for the holiday season.
Kmart also launched an online layaway option in October in time for the holiday season.
"We expect to draw a new set of customers," said Shannelle Armstrong, a Kmart spokeswoman.
Though layaway is increasingly popular with shoppers and retailers, it's not exactly overtaking the industry, Davis said. And it could recede again, as it did in the 1990s, once the economy - and credit - rebound, she said.
But for now, the resurgence in customer interest in layaway that began with last year's economic troubles is continuing.
It's the perfect time for layaway to make a big comeback, said Roger Jacobs as he and his wife browsed through Sears recently at Arden Fair.
When their three children were younger, Jacobs said he used layaway regularly for the holidays at long-gone places like Western Auto and Montgomery Ward.
Back-to-school shopping regularly started with a pile of clothing at the cash register early in the summer to put on layaway, he said.
"It helped people who didn't have the cash," said Jacobs, 58.
"Now, it's a lot tougher. You have to come up with cash money," he said.
Demand for layaway is out there, since Sears reinstated it last year after dropping it for several years, said Paul Golden, a spokesman for the National Endowment for Financial Education.
With credit limits lowered even for those with good credit, layaway could appeal more widely this season, even with a limited number of retailers offering it, he said.
Layaway started in the Great Depression so people could afford goods, said Golden, whose nonprofit works to improve personal finances. Most stores, including major department stores, offered layaway. By the mid-1990s, as stores began issuing their own credit cards, they discontinued layaway.
The advantages of layaway vs. running up a credit card is still timely, Golden said.
"If people understand the policy, it can be an effective tool to afford holiday expenses," he said.
But even with minimal risk, shoppers can still overspend, he cautioned.
"If you're buying $200 worth of presents, make sure you can pay the $50 every week before Christmas," he said.
Generally, stores charge a small fee, $5 or $10, for layaway, and shoppers pay a down payment and agree to timely payments. If the customer defaults, the merchandise is usually returned to the floor, but the customer's payments are returned minus a cancellation fee or other charges.
A major selling point is that the transaction does not affect a customer's credit rating.
Men's Wearhouse has always offered layaway, said Mark Neutze, executive vice president of stores for the clothier.
The store's policy is relatively flexible, requiring customers to make regular payments, he said.
Kmart's longtime layaway plan was not used as much after the advent of credit cards, said Armstrong, the company spokeswoman, although it picked up last year. That led to the online layaway program in October, she said.
Shoppers can choose merchandise online - not all items online are available for layaway - and pay online, then pick up the item at a selected store.
Toys R Us launched layaway at its stores, including Babies R Us, in October, said Katie Reczek, a spokeswoman. Reczek couldn't say whether the company would continue past the holiday season with layaway.
Just outside Sears at Arden Fair, Sheila Parisena, 43, gathered up her purchases and fitted all of them into a big red Macy's bag.
If more of the stores she shops offered layaway, she'd use it, she said.
"I haven't used layaway for, oh, 10 years. I don't think a lot of people know about that option," she said.
"Now, I try to use cash or debit. The key word is 'try,'" she said.
Check with individual retailers to see if they offer layaway. If so, here are some things to keep in mind.
- Find out how much you'll need for a down payment, the payment schedule to fulfill the layaway obligation, and how much each payment will be.
- Make a shopping list before you go to the store and be realistic in what you can afford to pay during the allotted time.
- Make sure you understand the service fees and layaway cancellation and refund policies. At Sears and Kmart, for example, if you change your mind, you'll get a full refund, minus the contract fee and a $10 cancellation fee.
- When going to the store to make payments, go in and get out. Don't browse and shop for more items. Impulse items can wreck your budget.
- Keep accurate and detailed records of your layaway contract, your purchases and all payments that you make.
- Be diligent in watching sale ads. If you put something on layaway that later goes on sale, you could arrange to get it at that sale price.
Source: National Endowment for Financial Education
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