When I was a kid, if I was at the store with my mother and I pointed to a big ticket item that I wanted, she woud reply, “We’d have to put that on layaway to afford that!”. I didn’t really know what “layaway” was, but then she explained it to me when I was older and it made a lot of sense. Pay for something weekly or monthly increments until you’ve paid for it in full. Then, they give you the item. However, that was back in the 80’s when it wasn’t as easy to get a credit card or home equity line of credit. In the past 20 years, the use of credit cards and home equity lines has skyrocketed, and the average consumer carries thousands of dollars in debt. Our culture has changed since our grandparents and parents were young. Instead of saving up to pay for something, we want it now, so we buy now and pay later. But, all of this paying later business equals billions of dollars spent on interest every year on products that GO DOWN in value, including cars. But now that the economy has slowed down and many Americans are starting to realize that they need to get out of debt, the use of layaway in the retail industry is coming back.
K-Mart and TJ Max have already brought back layaway as an option for buying big ticket items, and there’s a website called eLayaway
When should you use layaway?
Use it when you don’t have enough money to pay for something worth more than $100, but you will have enough money within 3 to 4 months. Don’t put something on layaway for a year. Chances are that a better product will be out there in a year, and you might not even need it in a year.
Are there fees associated with layaway?
Some retailers offer it for free, but they have a strict payment policy. Like if you are late on paying, they’ll put it back on the shelf. eLayaway has a 1.9% flat transaction fee that they charge, but it’s better than paying 18% interest on a credit card.
The Bottom Line
I still don’t recommend layaway over the traditional saving up and paying for something method, but it’s a much better alternative to paying with a store charge or credit card and carrying a balance. You’ll save money on interest, but you’ll also re-train your brain to think that you must WAIT to have something that you want. Instant gratification has plagued our culture and put us into massive debt. The “I want it, and I want it now” mentality of American consumers has only hurt us, and the option of layaway is one step closer to helping Americans break that mentality.