The New Days of Layaway

I heard on the radio this morning that KMart is going to start marketing its layaway plan more aggressively now. That makes sense given the expectation credit will be more difficult to get than before. In 2006, Wal-Mart discontinued its layaway program citing decrease in demand and cost of implementation. I wouldn’t be surprised to see them change back in coming months.

So what are the benefits for the consumer of using a layaway system?

• No borrowed money. Your credit isn’t an issue because you’re spending money you have in hand each month or week.
• Low risk. If you cannot make your layaway payments, they don’t come after you demanding payment.
• No interest, low fees. With an up-front fee schedule, you know exactly what it’s going to cost you to layaway an item.
• Ensure you can get a high-demand product. The New Big Thing is released and you don’t have the money for it yet. Ensure you get yours by putting one on layaway!

Why shouldn’t you use layaway?

• You still pay more for it. At KMart, a layaway contract costs $5, plus you have to pay a $10 cancellation fee up front, so each item you place on layaway guarantees your paying $15 more for it.
• Not “No” risk. Low risk? Sure. No risk? Not close. If you are seven days late on a payment, your item will go back to the shelf. You can get a refund on the product, but you don’t get the $15 back.
• Spending future dollars. This also plays into the risk factor. You’re spending money you haven’t earned yet. Should something happen, you might need to use that money for something else.
• It’s a greed tool. You see something you want and you have to have it, regardless of if you have money for it or not. So you get it by any means necessary. Look, it’s OK to save for something, but don’t pre-pay for it!
• It’s a poverty tool. Dave Ramsey says, “If you want to be rich, do what rich people do.” I’m pretty certain that rich people don’t buy things on layaway. Why? Because buying something on layaway shows: a) You don’t have a plan; b) You don’t know how to make money work for you, and; c) You don’t have any money to begin with.

What’s the alternative?

I hope it’s obvious at this point: Save for it! That gives you pause to make sure you have the funds, as well as really think through to purchase to make sure you’re spending wisely to begin with.

Related Posts

• The Decline of Financial Honorableness
• The Legacy of the Gray Hoodie
• Wal-Mart: Now Available on Credit!
• How to Overcome Empty Hope
• The Crutch for Poverty - Blog Action Day 2008