Thursday, April 16, 2009

Dusting off Layaway

Remember layaway? I sure do – I remember when all the big box retailers had a layaway counter in each store. Scores of shirts, pants, toys, lawnmowers, and unassembled kitchen tables would be scattered around the counter as the layaway folks processed tickets and moved the items to storage. Remember what happened to layaway? I sure do – the big box retailers started offering “10% off your entire purchase if you open a store credit card.” A pretty smart idea for the retailers, really: no longer did they have to store items that weren’t completely sold. And – oh yeah – those little things called interest and late fees were a bit more lucrative.

Layaway grew in popularity back in the 1920s and 1930s, long before credit card applications lined the checkout counter. For a small fee, typically around $5, customers can pay for their purchase over a 30 or 60-day period, then take it home with no strings attached.

Kmart and Sears have both remained stalwart in their adherence to the longstanding layaway tradition. Since the economy slipped and sputtered some of their retail brethren are reintroducing the payment option to entice more folks through their doors.

What interests me about the resurgence of layaway is how so many folks refer to it as “old fashioned.” The idea of buying something only when you can afford it is foreign to our microwave culture. Certainly, credit cards are not going the way of the dinosaur anytime soon, but if the latest economic dip has taught us anything it’s that living outside of our means is a recipe for failure.

While I definitely prefer the use of layaway to credit cards, I would recommend trying a non-monthly expense fund. Rather than put a lawnmower or new wardrobe on layaway, try paying a portion of what you’ll need to spend into a savings account. Once you’ve saved what you need to make the purchase, head to the store and spend your cash. You’ll avoid the layaway fee and come home with your purchases right away. Want to have some fun? See if you can negotiate a discount when paying with cash upfront – you’d be amazed what bargains retailers are willing to give for a sale.

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