Originally created 12/16/03

Layaway competes with credit



Patricia Pitts, of Grovetown, buys only on layaway at Christmas.

"I have three boys at home, and I have one that likes to go through everything," she said, adding that store layaway departments provide a great hiding place for toys.

But buying holiday gifts on layaway offers consumers more than just a great hiding place. It offers the opportunity to capitalize on sales, pay off an item over time and avoid credit card financing fees.

But many shoppers don't take advantage of the service, opting to buy on credit.

"With layaway, you're spending cash," said Betty Ashley, of the Consumer Credit Counseling Services of the CSRA. "But with a credit card, you're spending someone else's money. It's like taking a short-term loan."

While buying on layaway requires a minimum deposit and regular payments, many stores do not charge service fees or interest. All items must be paid for before they can be brought home, meaning shoppers don't have to worry about paying off gifts after they have been given.

Many industry experts say layaway - even the plans with service fees - is a better deal than charging it.

"It makes more sense to purchase on layaway," said Stephen Brobeck, the executive director of the Consumer Federation of America. "Even with a service fee of $5, it would be less expensive than paying with a credit card unless the balance is paid off immediately."

Buying on layaway doesn't require a customer to have good credit or a bank account.

"It increases the buying power of the family," Wal-Mart spokeswoman Sharon Weber said, adding that many shoppers cannot afford to buy all the items they want at one time, particularly when large holiday sales entice shoppers to buy more.

Yet despite layaway's benefits, it's declining in popularity.

Many consumers want instant gratification, and that often translates into a buy now, pay later mind-set.

"Most people don't buy things three or six months ahead of time," said Ellen Tolley, a National Retail Federation spokeswoman. "They buy them right away. It's a shift in consumer behavior."

Layaway requires consumers to plan out their purchases, such as buying a bathing suit in January, Ms. Tolley said.

While many financial advisers suggest consumers plan their purchases, Ms. Tolley said consumers rarely do because credit cards make it easy to get things when they want.

And as fewer people choose layaway over credit card purchases, retailers are eliminating the service, Ms. Tolley said.

"Most retailers would rather put the one or two people who used to work the layaway counter on the store floor helping customers who won't use layaway," she said.

POLICIES CAN DIFFER

Nearly all stores offer some sort of layaway program, but a random sampling of layaway policies illustrates that rules can differ among retailers.

T.J. MAXX: Only nonsale items are eligible. Nonrefundable $5 fee, a deposit of $5 or 10 percent, whichever is greater, for 30 days.

CIRCUIT CITY: Only new items with a minimum retail price of $50 are eligible, excluding computers. Minimum 20 percent down payment and a service charge equal to $1 per $100 in value - up to $10 - is applied. Layaway period is up to 90 days. A 2 percent restocking fee is applied to canceled orders.

KMART: A $5 service fee and 10 percent, or $10 down, whichever is greater, for a period of up to eight weeks. A $5 fee is applied to canceled orders.

WAL-MART: Ten percent down for a period of up to 60 days.

Reach James Gallagher at (706) 823-3227 or james.gallagher@augustachronicle.com.