Think 1982, legwarmers, permed hair and Blue Light Specials. In the right frame of mind? Good. Now prepare to take this in: Layaway is making a comeback. For real.
Kmart is doing it. Sears is doing it. So are TJ Maxx, Marshalls, Best Buy, Burlington Coat Factory, Men's Wearhouse, Toys "R" Us, a slew of jewelers and dozens of retailers who are accepting layaway payments through this eLayaway site. Stores that began reviving long-dormant layaway programs over the past couple of years are keeping them going, even expanding them.
It's the economy. The Great Recession may have officially ended a year and a half ago, but consumers are continuing to exercise caution in their spending habits. Growing numbers of people from every imaginable income level are shunning credit-card debt and embracing frugality. And what's a sure-fire way to shop with discipline and make big-ticket purchases without taking on any lingering, crippling debt? Put stuff on layaway.
With layaway, you don't get to take anything home until you're done paying for it. Stores' nominal layaway fees -- often in the $5 range -- appeal to many shoppers more than the potential interest charges and other costs associated with credit-card debt. Basically, you can just plan to pay for your holiday gifts or other purchases over a period of 30 days to 13 months, depending on the retailer. Once you're all paid up, you get your goods.
That said, caution is still needed -- proving that even the most well-intentioned, thrifty and careful consumers can get tripped up and hurt. The Better Business Bureau says it's received hundreds of complaints in the past year from people who lost money when they attempted to put purchases on layaway. To prevent financial heartburn right before the holidays, consider these tips from the BBB and the National Endowment for Financial Education:
--Know what you're getting into. Retailers' layaway policies vary quite a bit. Some require hefty down payments; some don't. Some give you lots of time to pay off your purchase; some don't. (For instance, Sears recently began allowing shoppers to spread their payments out over 12 weeks instead of the usual eight weeks. Good to know!)
--Understand when the deal will disintegrate. The BBB says many consumers complained about diligently making payments on an item for weeks or months, then learning that the item had been sold to another customer. Find out exactly when final payment must be made so you don't get burned.
--Do business with reputable retailers. Other BBB complaints centered on stores that went out of business before customers received their merchandise. To avoid that, enter into layaway agreements with well-known businesses, and remember that making those gradual layaway payments on a credit card could afford you at least some protections. (Unlike cash payments, you can dispute charges if your products never get delivered.)
--Budget, budget, budget. If you're opting to use layaway because money (or credit) is tight, make sure you'll really be able to handle the layaway payments. Consider this scenario from the National Endowment for Financial Education: "If you buy $300 worth of presents for your children, make sure you can commit to paying off $50 each week."
--Find out what fees will apply if you change your mind. Clarify the retailer's layaway cancellation and refund policies. Many consumers who complained to the BBB were shocked when they tried to cancel layaway orders and got hit with restocking fees of 10 percent or more. Others were disappointed to learn that refunds only involved store credit, not cash. So remember: Ask first.