Layaway: An Option for Cash-Strapped Shoppers this Holiday Season

More retailers are going back to the past this Christmas season, and offering layaway to help customers manage their holiday gift buying.

Layaway was a popular option in the 1950s, but when credit cards became mainstream, layaway lost favor. Layaway programs allow a customer to put a certain percentage down on an item, and then pay periodically until the item is paid off and the customer takes it home.

“The last few years we have seen an increase in layaway with the downturn in the economy. It’s a low risk, high reward way of getting a gift,” said Peter Gill, manage of communications for the Illinois Retail Merchants Association.

Gill said layaway is an option for customers who no longer have credit cards as well as for those who don’t want to use credit.

He pointed out that credit card use for holiday gift giving has declined, according to a news release from the National Retail Federation. The most popular payment methods are debit cards and check cards.

“It’s really important to offer layaway in these times. It’s a very reasonable way for people to afford gifts,” he said.

Gill said retailers are offering layaway as a way to compete.

“As one store does it, then the others do. It’s a good deal for customers and there’s a benefit for the retailers because they are not losing business to customers who say they can’t afford the gift,” he said.

While layaway is returning to many big box stores including WalMart, Sears, and Toys R’Us, many small retailers never stopped offering layaway.

“A lot of independents have done this for loyal customers for years. They are king of their own domain and they do it to help their customers out,” Gill said.

At Wheel Werks Bikes in Crystal Lake, owner Bob Olsen said the store has always offered layaway and doesn’t charge any extra fee.

“You can put down 10 or 20 percent. They may find a really good sale bike, we put it aside for them and when they’re done paying it’s theirs,” he said.

“It’s a lot easier to work with small businesses. It’s how I’d want to be treated. We make it easy for people,” Olsen said.

Ross Stevens of JCs Guitars in Algonquin said the store has offered layaway since it opened.

“We don’t have our own financing, so it’s another mode for customers if they want to avoid credit card fees. The customer can pay as they please and they don’t have to worry about interest or fees,” Stevens said.

He said offering layaway often results in a customer buying a higher-priced item.

“If they can pay for it over time, they are willing to pay more. They may have gotten a $300 guitar; now they may go for a guitar that is $600 or $700,” he said.

Most major department stores offering layaway charge a $5 fee and some charge interest. At some department stores, not all items are available for layaway. Stores generally have a minimum price that is eligible for layaway and a deadline for completing the purchase. Some also have a cancellation fee. Some stores, like Best Buy, only offer layaway in select stores.

U.S. Sen Charles Schumer of New York has been critical of layaway, charging that customers may not be aware of the full costs of layaway, which he says could be more than the costs of using a credit card, in a AP article.

“I think he’s comparing apples to helicopters. Credit is a completely different animal than layaway. The stores are making money with layaway because they are making a sale,” he said.

Here are the layaway terms at some major retailers:

• Kmart Layaway
• Toys R’Us Layaway
• Walmart Layaway
• T J Maxx and Marshalls Layaway
• Sears Layaway