KOKOMO, Ind. — Corine O’Neill needed to do her Christmas shopping on a tight budget this year and was wary of using credit cards. So she turned to an old program once popular among budget conscious shoppers - the layaway.
O'Neill filled two layaway boxes, worth about $100 each, at the local Kmart and paid a nominal down payment. She scheduled payments every two weeks, coinciding with her paycheck, until the boxes are paid off and she can take the items home.
“This way, it doesn’t affect your credit score at all, but you’re able to stretch out your payments,” said O'Neill.
O’Neill is like many shoppers who are leery of debt or bad credit. Retailers have responded by creating or reinstating layaway programs that fell out of fashion years ago.
Walmart, which discontinued layaway in 2006, brought it back last year amid high customer demand, said spokeswoman Latoya Evans. In October, it had already lined up $400 million in layaway sales for the holiday season, she said.
Large retailers have streamlined layaway plans to entice shoppers. Kmart, for example, promotes online layaway “baskets,” which can be shipped to a home address.
“In our area, there’s high unemployment and high underemployment,” said Richard Feinberg, a Purdue University professor of consumer sciences and retailing. “What can stores do to help them buy more?”
Feinberg said layaway programs were common in the 1950s and ’60s, when credit cards weren’t used. They've reemerged as consumers have maxed out credit cards or simply don't have credits cards.
Feinberg says layaway is a responsible choice for a particular set of consumers, but he warns people to keep up their payments. In the past, he said, layaway users were crippled by fees and hidden costs, though many big-box stores have eliminated those or lessened their severity.
The rules differ with each program. Down payments vary, as do rules about what happens when shoppers miss payments or a layaway is cancelled. Some layaway programs are offered only during the holiday seasons, and some are year-round. Some restrict the types of items available for layaway.
Feinberg advises consumers to read the fine print before enrolling in any program.
On the positive side, layaway rids shoppers of the anxiety of seeing something go out of stock before they can buy it.
Kylie Taylor used Walmart's layaway to buy toys for her son to make sure they wouldn't be gone later.
“I didn’t want to have to worry about Black Friday and running out," she said.
Megan Graham is a business reporter for the Kokomo, Ind., Tribune.