Layaway programs are making a comeback, but they look a little different than they did a decade ago. While stores still charge customers fees for the ability to pay for purchases over time, some stores now offer refunds on those fees after customers pay for the items in full. Walmart recently announced that for this holiday season, it will refund the $15 fee to open a layaway account after customers make their final payment, and it will no longer charge a cancellation fee to customers who fail to finish paying for the item.
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Layaway programs have long been used by shoppers, especially lower-income ones without easy access to credit, to manage their holiday shopping budgets. While layaway programs fell out of favor in the mid-2000s as credit cards made it easy for people to get what they wanted right away, they’ve been making a comeback ever since the financial crisis tightened the credit markets and made it harder for shoppers without stellar credit histories to get cheap credit.
Despite some of the improvements to layaway programs, such as Walmart’s refundable open fee, personal-finance experts still warn about the risks: Many stores charge a non-refundable fee to open a layaway account, which customers forfeit if they don’t end up paying for the merchandize in full. Also, customers could avoid layaway fees altogether if they saved money in advance and then waited to make purchases until they had enough cash.
Here’s an overview of the layaway programs available this season:
Walmart: Despite canceling its layaway program in 2006, citing the high cost of running the program, this big-box retailer decided to bring back the program for the holidays, starting September 16 and running through December 14. (Facebook fans of the company can get started early, on September 14.) Products from home appliances to electronics and jewelry are eligible for layaway.
Kmart: This long-running program plays by relatively simple rules. Shoppers pay $5 to open an account, $10 to cancel an account, and a downpayment of $15 or 10 percent of the total purchase price. They make payments every two weeks over an eight-week period.
Sears: Sears, a sister company to Kmart, offers a similar layaway program. For items that cost $400 or more, customers can extend the eight-week payment plan to 12 weeks.
T.J. Maxx: Not all T.J. Maxx stores offer layaway; for those that do, shoppers can put items on hold for 30 days after paying $10 or 10 percent of the total cost, along with a $5 fee. Certain items, including jewelry and furniture, can’t be put on layaway.
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Toys R Us: This retailer also offers layaway, but the rules vary by store. Customers should check ahead of time to see if their store participates and what the rules are; some stores allow baby items to go on layaway but not electronics or large toys, for example.
Do you plan to use layaway this season?