Once upon a time, department and discount stores routinely allowed shoppers to set aside money in special accounts so they could save up for big-ticket goods like televisions and furniture. Once you socked away enough cash, the item was yours.
For those too young to remember, these programs were called “layaway” plans, and they were great because they instilled discipline – you couldn’t have what you couldn’t afford. Simple concept, right? Customers paid a percentage of the purchase price as a down payment and then spread the balance over several months.
When consumer credit became more readily available – for better or worse – it marked the beginning of the end of the layaway, and most stores gradually did away with the practice. Wal-Mart, for instance, eliminated its program last year. Forced savings over time simply couldn’t compete with instant-gratification credit, though we’d probably all be better off in these unsettling times if we had continued to follow that basic principle.
But one notable chain stuck with the layaway and is actively promoting it this holiday season ...
That firm is Kmart. With 1,400 stores nationwide, the Chicago-based discount chain says it’s the only remaining national retailer that still offers a layaway plan. Susan Erlich, head of financial services for Kmart, says the company wants to help its customers stick to a shopping budget and avoid piling up credit-card debt. We applaud that. And last year, 3.2 million Kmart customers bought merchandise on layaway.
Here’s how it works:
It costs $5 to set up a layaway account at Kmart, and you have eight weeks to pay off the total. When you open the account, Kmart takes the item off the store floor so no one else can buy it. If payments are more than a week late, your merchandise is returned to the sales floor, and you’re entitled to a refund, minus a cancellation fee of around 10 percent.
Not all products are eligible for layaway purchase, including alcohol, cigarettes, food, and personal computers. And if you’re planning a holiday layaway purchase of electronics equipment priced at more than $200, you only have until Nov. 15 to open an account.
If you’re intrigued by the layaway concept, but do most of your shopping online, here’s a tip. Try using eLayaway. eLayaway isn’t a merchant, but a payment method, just as Visa, Paypal, and American Express are. When you check out from any participating e-tailer, you simply click the eLayaway option. The company has partnered with more than 1,000 Web retailers, including the Gap, Adidas, Bass and Pro Shops, that allows users to shop and pay over time through regular, automatic deductions from their checking account, with delivery upon full payment.
As with any layaway plan, there are no interest charges. Buyers pay a flat 1.9 percent transaction fee. If you cancel your purchase, you’ll get all your money back minus a $25 penalty.
How could they make these plans better? One way would be to offer consumers interest on the money they salt away. After all, they’re holding your money – so why shouldn’t they pay you interest, even if it’s a small percentage? We haven’t seen any plans like that, but let me know if you have at tightwad at cro dot consumer dot org.
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