Back to Buying Bit by Bit
In This Season's Credit Crunch, Holiday Shoppers Are Resorting to Layaway

By Ylan Q. Mui
Washington Post Staff Writer
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 "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."

But there are some drawbacks and additional fees with the service. Stores typically charge a cancellation fee if shoppers decide they no longer want -- or can no longer afford -- the merchandise. Some also allow shoppers to pay regular installments using a credit card, which once again puts them at risk of getting in over their heads.

Ludwig Bstieler, an associate marketing professor at the University of New Hampshire, said that layaway may also not be useful for electronics or other products that evolve quickly. By the time the shopper has paid for it, the merchandise may be nearing obsolescence, he said. Bstieler also said that retailers like layaway because it brings shoppers into their stores more often, which in turn encourages them to spend more -- another potential pitfall for consumers.

Retailers created layaway during the Great Depression as a way to encourage shoppers to buy merchandise even if they couldn't afford to pay the full price. But then consumer credit exploded during the 1970s and 1980s, and many stores phased out the service in favor of issuing their own credit cards. Household credit card debt averaged $9,840 last year, according to, up more than 200 percent since 1990.

Now, only a handful of stores still provide the service. Wal-Mart ended it two years ago because of lack of demand. Target, Circuit City and Best Buy have also discontinued layaway, which requires retailers to store the merchandise, track payments and staff service counters.

But Kmart has made layaway a centerpiece of its holiday advertising campaign with TV ads and radio spots. It proved to be so popular that its sister company, Sears, decided to bring layaway back for the holidays after a 20-year hiatus, though the program is not available for its appliances and home electronics. Oprah Winfrey has mentioned it on her influential television show. One online layaway site expects traffic to increase 50 percent for the year.

Sears spokesman Tom Aiello said the program has attracted shoppers on a budget as well as consumers wary of racking up credit card debt. According to a recent poll by Consumer Reports, 6 percent of Americans are still paying off holiday bills from last year. The program requires shoppers to pay off purchases by Dec. 23. Kmart's layaway contracts last up to eight weeks, and the merchandise is returned to stock seven days after a customer misses a payment.

"It's definitely being used by a broader spectrum of customers than one might initially assume," Aiello said.

Boscov's department stores typically see a bump in the number of layaway purchases during the holiday season and expected this year to be no different, said Maralyn Lakin, senior vice president of advertising and marketing. The retailer touts the service on all of its circulars.

"I think everyone is looking at alternative ways to pay with the financial world the way it is today," Lakin said. Still, layaway's delayed gratification begs a larger, perhaps more existential, question: If you can live without something for two months, do you really need it?

"There's always a better solution to not buy as much stuff," Marks said.

But Bstieler said the service can come in handy when consumers know that they will need to make large purchases in the future, such as during the holiday season.

Drey Williams, 13, watched as his father, 43-year-old Aldo Barbour of Hyattsville, put his Christmas presents on layaway at Kmart recently: video game Rock Band and controllers for his Nintendo Wii.

"He has to wait for it," Barbour said.

The cashier rang up his purchases, which totaled $417.19. Last year, Barbour said, he could've paid for those gifts outright. But the economy has taken its toll on him, and he has had to turn to layaway for the second time in his life. He scanned the receipt and sighed.

"I have to do that for him," Barbour said. "I can make it. Layaway is going to help me."

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