Retailers roll out layaway plans early for 2015 holidays – CreditCards.com

Before Labor Day cookouts even started this year, retailers began rolling out holiday layaway plans. Although that may seem absurd to traditionalists, starting early with layaway can help you reduce January credit card debt.

Wal-Mart led the way, offering layaway plans Aug. 28 to help shoppers get a jump on hot toys. “Wal-Mart launched layaway two weeks earlier this year in anticipation of the Star Wars merchandise launch on Sept. 4,” spokesman Kory Lundberg says.

Toys R Us also began its holiday layaway on Sept. 4, a week earlier than last year. Other major retailers began offering holiday layaway in September, too.

With layaway, a shopper makes a down payment on merchandise and then pays it off by a certain date or within a certain time frame. Some retailers require payments every two weeks; others, such as Wal-Mart, have no set payment schedule — you just pay off as much as you want, whenever you want, as long as it’s paid off by the deadline.

Paying forward

Shoppers who head to the stores early may be doing their budgets a favor, says Katie Bossler, a financial counselor with GreenPath Financial Wellness in Detroit. “For most of us, there’s not that much flexibility in the budget to pay for everything in December,” Bossler says. “Waiting until December might mean you put things on credit. … If you buy something for $100 on credit, you might be paying it off for 10 months and paying more. You’re paying it backward.”

But with layaway, you pay for the item before you take it home — paying it forward instead of backward, Bossler says. The fact that you have a hard deadline to meet for paying off the item helps focus your budgeting, too, she says.

For retailers, layaway is all about keeping customers satisfied. “We know customers use layaway for a number of reasons, including to beat the holiday rush by shopping early, ensuring they’re getting the hottest holiday items they want of the season without worrying about paying for them all at once,” Lundberg says.

Wal-Mart is very good at studying its customers’ needs, says Ron Hess, associate professor of marketing in the Mason School of Business at the College of William and Mary in Williamsburg, Virginia. “Does their target market really want and need a layaway plan? The answer for Wal-Mart and a lot of these other discounters is absolutely yes,” he says.

Layaway can also help you nab popular items before they run out. Last year, merchandise from the hit movie “Frozen” was in high demand, Hess says. “Getting Elsa or other items from ‘Frozen’ was impossible,” he recalls. “My wife went through all kinds of hoops. Lots of different items are going to be sold out permanently by December. For consumers, it comes down to getting the items they want, and they’re afraid they won’t have the money.”

Not your grandmother’s layaway

Layaway plans started in the late 19th century and became popular in the 1920s as a way for people to pay for items such as washers, dryers and refrigerators that were hard to pay off right away, Hess says. Over the following decades, formal layaway plans dwindled in popularity until they came roaring back during the recession, as consumers looked for ways to maintain holiday giving without credit cards.

Even though the recession may be over, many consumers have continued the credit-wary, frugal ways they adopted when times were tight, Hess says. Perennial popular layaway items today include expensive electronics such as big screen TVs and, of course, toys.

Layaway plans have evolved over time, with some stores offering options to pay online and pick up items at another store location. “I was checking out some of the different retailers’ policies,” Bossler says. “You can do layaway online. It’s becoming a 21st century alternative to credit.”

And if you’re a shopper motivated more by Black Friday sales than early fall shopping, Kmart has you covered. For the second year in a row, Kmart is offering no-money-down holiday layaway through Sunday, Nov. 29. “Thanksgiving and Black Friday shoppers can take advantage of the payment option,” says a Kmart representive.

A final reason to use layaway: To help keep gifts a secret from prying eyes at home, Lundberg says. “They can use layaway to store gifts and keep loved ones from finding those gifts in the house before Christmas,” he says.