The Root

In an article for The Root, Natalie P. McNeal writes: "Many folks older than 25 spent their childhoods at the layaway counter, wayyyyyyyyy in the back of a store, watching Mama put away that fly winter coat, entry-level designer bag or warm boots until they were paid in full."

"Now layaway is back. Over the past two decades, it had become little more than a joke to upwardly mobile types with wallets full of plastic. But in this economic downturn, racking up credit card debt is suddenly out. Big time. Take a look around at your favorite stores. For a small fee, you can now put an item on hold and pay for it over a set number of weeks. No credit check required. And if you lose your job in the new year -- or tomorrow -- there is no ugly balance to pay off."

McNeal, who writes The Frugalista Files, was online Wednesday, Nov. 26, at Noon ET to discuss the return of the "penny-pinching classic" and how you can save money.

A transcript follows.

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Natalie McNeal: Greetings! Natalie P. McNeal here and I run The Frugalista Files blog. I'm writing from my mother's bedroom because I am visiting my childhood home for the holiday. I'm ready to answer all questions about the resurgence of layaway.

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Olney, Md.: Simplicity is indeed making a comeback.

Sears and Kmart, among others, have resurrected the layaway option.

For those who have weak credit or are not in good financial shape, this option allows them to be frugal but still be able to afford higher ticket merchandise.

Do you think layaway will give customers some economic freedom and become better consumers, instead of slaves to massive credit card debt?

Natalie McNeal: Yes, frugal living is all the rage. I think layaway is good for people who are in a financial bind and need to buy essentials like warm winter coats or boots. It certainly has lower fees than most credit cards, so that's a good thing. However, you have to be careful that you are putting items on layaway according to your pay day. If you have to budget that hard for an item that's not an essential, then that's a problem.

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Burke, Va.: Have stores figured out a less labor-intensive way to handle layaway? I remember working retail as a teen, and layaways were a major pain.

That said, I've never been a fan of the concept. Why not save your money until you have enough to purchase the item, then buy it? If it's gone, oh well. Even more money saved.

Natalie McNeal: I rarely use layaway. The line is always long and I'm not that patient. However, if I had a family to support, I'm sure I would stay open minded about it if times were tough. You have to decide between needs and wants. When I went to Marshall's layaway for my article, I had to wait almost 20 MINUTES for a customer service representative to staff the layaway counter. That was no fun!

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Hammonton, N.J.: I told my friend to check out Kmart's layaway program last week. She and her husband went through the store (which they have not visited in a while), picked out a bunch of stuff and when they got to the layaway counter, they were told they'd have to pick everything up by Dec. 5. What kind of sense does that make?

Natalie McNeal: Layaway is an option, but not a solution. At the end of the day, these companies want your money, preferably sooner than later. The resurgence in layaway is not because corporations are warm and fuzzy, but because they want to make it easier for people to spend money in a tough time. Credit cards are out of style now. Home equity loans are not en vogue. Retailers are hurting, so now layaway is the next best thing in a crappy economy. If the economy turns around, we'll see how cool layaway is.

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Alexandria, Va.: I heard that credit card companies bamboozled retailers into eliminating layaway by offering them no transaction fees, then the usurers added a transaction fee after layaway was gone.

Natalie McNeal: I had not heard that, but it's worth researching. Layaway is labor intensive. The associate has to ring up the purchase, package it and store it. I could see how a corporation during economic prosperity would want to do away with the service. However, now that times are harder, the companies are more consumer-friendly.

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GLM: So Natalie, how many pairs of jeans did you really put on layaway? Do you think that in some ways, it makes it too easy to rack up expenses for people with shrinking wallets?

Personally, I know I'm not going to stay on top of things. Luckily for me, I don't have children to take care, of and last year's coat still fits!

Love the blog!

Natalie McNeal: Hey GLM! Thanks for the Frugalista Files blog love! I only put away one pair of jeans for my mother. I've done plenty of shopping in my day, so I don't really buy clothes anymore. The good thing about layaway is that it gives compulsive shoppers a grace period to decide whether they really want to purchase an item. I think moderation is the key to life. Layaway responsibly!

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Natalie McNeal: Did any of your families use layaway growing up? What do you think about it? It shaped my childhood! heheh!

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New York, N.Y.: Isn't layaway just another form of overpriced store credit? Like I have a Macy's card and I think Layaway might charge just as much interest as having a store charge card.

Natalie McNeal: It depends on what your APR is. I doubt that layaway fees are more than a store card. The fee for my jeans was only $5. Some store credit cards have 20 percent APRs. If you had charged the jeans and didn't pay them off in the first month, there is the potential for a $30 pair of jeans to cost $60 with finance charges.

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Hackensack, N.J.: It's been so long since I did layaway. What happens if you lay away stuff and decide later that you really can't afford it? How much of the money you paid do you lose? Or will the store send a collection agency after me for the money?

Natalie McNeal: The store gets their layaway fee up front. Once you pay the required layaway fee, you are free to not pick up the layaway and recoup your down payment.

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Washington, DC: Aside from Sears, Kmart and Marshall's, what other stores offer layaway plans?

Natalie McNeal: Burlington Coat Factory and TJ Maxx have the service. Also, there are online sites such as elayaway.com and https://www.lay-away.com.

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Fairfax: The last time I used layaway, at Caldor's in the early 1990's, they lost my son's toys for Christmas and refused to give me a refund. I stopped using layaway then and just bought items throughout the year and saved them for holidays and birthday.

Natalie McNeal: Caldor's is out of business, right? After reading your comment, I see why. And buying holiday gifts throughout the year is the best way to budget.

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they were told they'd have to pick everything up by Dec. 5. What kind of sense does that make?: stores are built with much smaller storage now. Someone figured out it was a waste of space and labor to move stuff from truck to storage to shelves. Walmart pioneered the inventory tracking that allows merchandizers to take product from truck to shelves. There's no place to store layaway and space costs money.

Natalie McNeal: Indeed. However, retailers are hurting now. They are being customer friendly and finding ways to reach out. Layaway may not last, but it appears to be popular now.

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Washington, D.C.: Do the TV ads remove the stigma of buying on layaway in your opinion?

Natalie McNeal: Oh, I most certainly think that the ads showing happy people touting layaway is a brilliant marketing strategy. Frugality, saving and budgeting are in style now My blog deals with frugal and fabulous living and it's done very well. Budgeting is a buzz word.

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Kennesaw, Ga.: Man, I remember layaway, it was always so embarrassing to me. And now it is back, sigh. With the recession being where it is, how long do you think it will stick around this time?

Natalie McNeal: I hear that America will have a spotty economy until about 2015. As long as people are not shopping, retailers will find more ways to accommodate potential customers. I hated that long layaway line as a youth. My dad hated that my mother used the service. But, for shopaholics, layaway is a past time.

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do the math: If layaway requires pick-up within the month and charges $20 -- you can charge it, pay the same price a month later when the statement comes and pay NO FEE. Same item, same time period, no fee.

Natalie McNeal: Right. But as we see with the average credit card balance for Americans in the thousands, not enough of us are paying the bill off.

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Layaway is labor intensive: and SPACE intensive. At $100/square foot, layaway is not cheap!

Natalie McNeal: So you think the resurgence of layaway is not going to help the stores with their bottom line? Having a business with no customers is expensive too.

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Washington, D.C.: Cool blog. Wondering about some of your other secrets for saving money this holiday season - help!!

Natalie McNeal: This holiday, try to focus on enjoying your loved ones and not spending money on them. Here are some tips for how you can enjoy your family during the holiday:

http://miamiherald.typepad.com/frugalista/2008/11/cheap-christmas.html

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USA: I LOVE layaway.

The fees are minimal, and it allows me to pay over time, plus, for some purchases, it gives me somewhere to store the items... i.e. Christmas gifts. My apt is teeny!!!

Also, lots of stores that have layaway, if the item goes on sale while on layaway, you still get the sale price, sometimes making your buyout cheaper and quicker.

Ex: I put a 9 piece Thomasville bedroom suite on layaway. The cost after taxes and fees was 2148.00.

I had an option of an 8 month or 12 month plan.

The 8 month meant payments of 268.50. the 12 month meant 179.00. I choose the 8 month plan and will have the bedroom suite in time for my birthday.

If I had put it on my credit card, which I could have done, it would have been 2148.00 at an interest rate of 9% for however long it took me to pay it out.

With layaway, you pay for your item, and when you are finished paying for it, you get it, and it's a done deal.

Natalie McNeal: A layaway success story!

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not into layaway: If I had to put something on layaway, it would mean I didn't have the money for it.

Which should tell me something.

Unless Goodwill offers layaway, I won't be using it.

Natalie McNeal: There's a movement for people to be non-consumers. Buying used can be drastically cheaper than buying something new. Buying used is good for the environment also. However, it just depends on your consumer personality. Some people like the latest goods.

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Online: For me, I'm afraid that I'd put more on layaway than I can afford! Yeah, I'm that bad! heh.

But if you have the discipline to just lay away what you need, and manage to pick stuff that won't go on sale, go for it!

Natalie McNeal: It sounds like you have a healthy attitude about layaway. You have to be thoughtful with everything. Frugalista Law! :)

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New York. N.Y.: Interest rates aside, is layaway any more responsible than credit? What about budgeting?

Natalie McNeal: Layaway can be seen as a form of budgeting. Some stores let you pay for an item over time and when it's paid off, you can take it home.

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70s child: Growing up in the 70s and 80s, I remember my mom taking us to KMart, but she scoffed at layaway as buying things you can't afford. She's right. Wouldn't it be smarter to save diligently year-round and having that slush fund to buy whatever you need when it's available? I understand the shoes Suzie needs NOW might not be there in a month, but if mom saved consistently she would already have the funds to pay for the item.

Natalie McNeal: I think you make valid points.

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Anywhere, USA: Not only was there layaway, but I remember my mother contributing to her "Christmas Club" at the local bank. A way to save a small amount of money each week to have a large wad of cash for Christmas shopping in December.

Natalie McNeal: Sounds lovely. Consistent saving is always sexy.

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not into layaway: If I had to put something on layaway, it would mean I didn't have the money for it. Which should tell me something. : Yes, there's a reason Natalie said layaway is for shopaholics... Layaway doesn't sound "frugal" to me. It sounds like a way for addicted shoppers to get a fix even when they are short on cash. Not the same!

Natalie McNeal: You have to lay away responsibly. I rarely indulge. If I had a family of four and had limited income, however...

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Ex: I put a 9 piece Thomasville bedroom suite on layaway. The cost after taxes and fees was 2148.00. : I have never paid that much for anything besides my car and my house. When I need furniture, I get hand me downs, go to consignment shops, find loss leaders at the furniture stores. My sleigh bed was $300. HOW you buy an expensive item really doesn't matter, we need to stop buying stuff and find less expensive items. Our parents did without brand new all the time and so can we.

Natalie McNeal: I'm big into bargain shopping. I bought my TV from a friend and my couch was in the clearance section of the store. Team value! I don't shop that much anymore. I am coasting.

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Richmond: I don't like the underlying message with layaway that's the same as with credit: You should find a way to get this new overpriced consumer good. NO. We should be reusing, using Craigslist, Freecycle, consignment shops, sales, etc. I can find good solid used furniture at consignment shops for a fraction of the new particleboard $2,000 bed at Haynes. The best: ask the universe. I can't tell you how often I've mentioned I need a item and someone at work or church says "oh, we have one we're tying to get rid of!" Beds, wardrobe, chairs, rugs.

Natalie McNeal: I get my secondhand goods from friends. I don't do well at thrift stores. I like to know the case history of my items. I have a lovely desk donated from a friend who was moving. He even set it up for me! :)

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If I had a family of four and had limited income, however... : The bottom line is living within our means, and neither layaway or credit cards support that.

Natalie McNeal: I agree that we all should live within our means, but some of us get that message later in life... I would hate for Tiny Tim to go without a coat. I'm dramatic. I know.

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Layaway vs. Credit Card: "It depends on what your APR is. I doubt that layaway fees are more than a store card. The fee for my jeans was only $5. Some store credit cards have 20 percent APRs. If you had charged the jeans and didn't pay them off in the first month, there is the potenial for a $30 pair of jeans to cost $60 with finance charges."

For $30 jeans at 20% APR, that's about 50 cents interest per month at the start. You layaway big ticket items, items beyond your paycheck: TVs, Receivers, Stereo Speakers. To beat the $5 fee you paid, you would need to spend or lay away at least over $300. I remember my mom using layaway. Not for jeans. Only for expensive items.

Natalie McNeal: Good stuff.

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If I had a family of four and had limited income: I would avoid paying any fees, like layaway fees, that only go into someone else's pocket and not toward my children. If that limited-income family can just make it without purchasing for one layaway cycle, they can save their cash and start fresh with no fees the next time their kids need stuff.

Natalie McNeal: Indeed, that is the best way.

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I like to know the case history of my items. : I love old furniture. It has depth and richness to the wood far beyond what you could buy for 10 times at a new store.

Natalie McNeal: My friends have old stuff, too. I hate particle board like the next woman. I think most goods are over priced, which is why I rarely pay full price. I am patient and pounce on deals. I find my deals in the closets of my friends or on the clearance rack at the mall. I am a big fan of buying floor models, too. You have to find your budget temperment and make it work for you.

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Kmart and the Dec. 5 deadline: Near the beginning of October, I put Christmas gifts on layaway at Kmart. I had to pay every two weeks and I had to pick them up by Dec. 5 because that's their Christmas deadline. It worked out really well for me. Every time I got paid, I paid on my layaway. And on Dec. 5, I will go pick up my Christmas gifts. To me, layaway works as long as you are realistic about what you can afford to put on layaway.

Natalie McNeal: Sounds good to me!

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I would hate for Tiny Tim to go without a coat.: Kids' clothes are the easiest to find at thrift stores cuz they grow so fast they grow out of it before it wears. You can get a new-looking coat for a fraction of the cost and spend the remainder on the kid's college education!

Natalie McNeal: Sure, why not. Whatever budgeting/saving philosphy works. I'm not going to persecute someone who uses layaway sporadically. However, if you have several items at different stores, you have a problem.

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DC: Little known use of layaway: To buy art. Many art galleries offer layaway (they don't call it that). It's the only way I've ever been able to buy art objects.

Natalie McNeal: Very nice. What did you buy!?

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I am patient and pounce on deals.: If you wait, you not only get better prices, but you have more money saved up so you can afford to take advantage of the sale.

Natalie McNeal: Frugalista Law! :)

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I am patient and pounce on deals.: It's all about delayed gratification, which most folks won't do now.

Natalie McNeal: They need to learn. Like yesterday. Send them a link to my blog! Frugality is all the rage!

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Maryland: My parents regularly used layaway when I was a kid. I never thought anything of it. It wasn't embarrassing because that's what I thought everyone did for Christmas gifts. At that time, they were in debt (not from overspending, just from trying to support a family). Layaway was the only reason we got half the things we did. We used it for presents, school clothes, whatever. I think that if people use it intelligently, then there's nothing to worry about and it can be a big help to lower-income people who really are trying to make it work. I have been able to stay credit-card debt free for my entire adult life, but I understand why it's important for a lot of people to have other options.

Natalie McNeal: Great story. You speak the truth when you write "if people use it intelligently."

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Another D.C.: I used to put things on layaway all the time in the 80's. Mostly at Casual Corner, which is no longer around. Many times when I would go back to pick up the final items, they had been marked down and I would get the sale price. Instead of making the final payment, I would often get money back!

Natalie McNeal: Really!?? I will keep that in mind!

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Richmond: I'd rather see layaway for a child's coat than for a bedroom suite. A child needs to stay warm, but no one who can't afford it needs a brand new matching 6 piece set. Check out the Trading Post and see how many of those suites end up in there for half price after folks can't pay them off.

Natalie McNeal: Sounds like a frugalista tip with that Trading Post comment. Now I'm intrigued. My philosophy is to find a deal however and wherever you can.

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Natalie McNeal: Ok, so this was a great way for me to spend my day! Thanks so much for rapping with me. Check me out at The Frugalista Files, http://miamiherald.typepad.com/frugalista. I couldn't get to all the questions, but feel free to keep the debate going at my blog. xxoo Frugalista!

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