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Just in time for holidays: The return of layaway

NEED TO KNOW
  • Several retailers have dropped all upfront fees
  • Some layaway programs are already available
The return of layaway is expected to attract more shoppers for the holiday season.

It wasn’t too long ago when layaway was so outdated that a lot of consumers didn’t even realize it still existed. Swiping a credit card became a lot easier than paying over time. But after taking advantage of plastic long enough, a lot of American consumers no longer have that option. So, thanks to the recession, the old-school payment program is back from the dead and retailers are battling for the best layaway plan available this season.

Several retailers have already announced new and improved plans ahead of this year’s holiday shopping season.  Sears and Kmart both announced they’re dropping all layaway fees year-round, in order to attract more shoppers. In the past, consumers paid a $5 fee to put something on an eight-week layaway plan or a $10 fee for a 12-week plan, but that’s now a thing of the past. The only catch is if you cancel the layaway contract, you’re charged a $10 fee. Not a bad deal.

The holidays are coming even earlier at Wal-Mart this year. The world’s largest retailer announced its layaway program will be available a month early this fall and will run Sept. 16 through Dec. 14. The reason for the extension is to give shoppers an extra month to pay off their purchases, and the store has expanded the items that can be put on layaway to include home appliances, some sporting goods and even jewelry.

Wal-Mart is also offering to refund shoppers’ $5 “open fee” with a gift card at the end of the completed layaway contract. Instead of just calling it a fee, Wal-Mart is using an “open fee” that shoppers can get back. If you cancel your plan, Wal-Mart keeps your $5, but if you follow through with it, you get a $5 gift card. So while it isn’t technically free, it’s pretty close.

The layaway program at Toys R Us is already up and running and fee-free until October 31. The program has no minimum purchase price, but consumers must put at least 20% down, pay off at least 50% of the purchase within 45 days, and then pay in full by December 16. Layaway will still be available after October 31, but it’ll require a $5 nonrefundable service fee. So if you’re headed out for toys, you better get on it.

HLN Money Expert Clark Howard is a big fan of layaway if it replaces a shopper’s January debt hangover and makes an irresponsible shopper more responsible. Stores starting the layaway season earlier means shoppers will have more time to pay off their purchases and they won’t be stuck either spending more than they can afford closer to the holidays, or putting it on a credit card and suffering the consequences in January when all the fun is already over.

The recession destroyed credit dreams for a lot of American consumers, so layaway gives them a way to buy gifts. And in many cases this year, shoppers are getting added value by choosing the payment plan since so many retailers have boosted the perks of their programs.

But there’s usually a catch, and here it is: For shoppers without access to credit, layaway gives them a way to purchase items they wouldn’t otherwise be able to. So while it’s great for affordable holiday gifts, it’s easy to get caught up in the purchasing power of the fee-free programs. Layaway is not ideal, but it forces undisciplined shoppers to be disciplined about spending and saving around the holidays.

If you do take the layaway route this year, you could get lucky and end up like all of those shoppers last year whose bills were taken care of by “layaway angels.” At various stores around the country last holiday season, anonymous shoppers paid off strangers’ layaway bills. And while these random acts of kindness did spread some holiday cheer, you probably shouldn’t count on it happening to you. So make sure you can afford the items you put on layaway.

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