Back to Buying Bit by Bit
Sunday, November 30, 2008
There was once a time, before credit cards blanketed the land, when shoppers had to pay for their merchandise in full before taking it home. That new dress, or sofa or washing machine, stayed at the store until, bit by bit, the bill was paid.
They called it layaway. And the age of cheap and easy credit pretty much killed it off. But as the economic crisis clouds this holiday season, some budget-conscious shoppers are embracing this concept of delayed gratification.
"It's a very good time for layaway to come back," said Gerri Detweiler, credit adviser for Credit.com. "It's certainly better than the charge-it frenzy we've had in past years."
Here's how it works: Shoppers put a small down payment on merchandise at their favorite store, which then squirrels it away for a service charge of roughly $5 to $10. Shoppers must return every few weeks for a few months to make payments until the merchandise is paid off. Only then can they take their prized possession home.
The drawn-out process may sound antiquated in today's world. But the one-time service charge is typically much less than what shoppers would pay in credit card interest. And several financial experts said the program encourages consumers to budget more carefully by forcing them to pay for their merchandise before taking it home. If they fall behind on payments, shoppers are refunded their money minus the service charge and a cancellation fee. They don't have to worry about the effects of compounding interest that has gotten so many credit card users in trouble.
"I think it's a great idea because it's kind of self-imposed shopping discipline so you don't basically buy over your head," said Tod Marks, who writes the Tightwad Tod blog for Consumer Reports.
Many shoppers say they rely on it to help them afford life's little luxuries -- and even its necessities -- especially at times like this when budgets are tight.
"All of the stuff that she has, everybody can't go into the store and buy it," said Tonya Long, 41, of Fort Washington, nodding toward the Dora the Explorer tricycle, Bratz guitar and EZ Bake oven in her daughter's shopping cart at the Kmart in Hyattsville.
Long, who called herself the "layaway queen," said her mother used layaway to pay for Christmas presents and now she is passing the tradition on to her children. They put more than $500 of toys on layaway with about $50 down.
The store's human resource manager, Belva Benbow, said it has been processing 75 to 100 orders a day, and the line can stretch for aisles. The traffic is typical for the holiday season, but Benbow said customers this year seem to be starting their shopping earlier.
Linda Queen, 52, of the District, put gifts for her two grandchildren on layaway at Kmart recently because she was worried that the selection would dwindle as Christmas neared. She said she lost her job with the District public schools in August and is living off savings. Queen said she cannot afford to pay for the merchandise upfront, especially as her bills rise.
"It's a recession," she said. "It's really affecting everyone."