Layaway plans make a comeback at stores

If you thought layaway plans had gone the way of eight-track players and floppy disks, think again. The deferred payment or installment plan, once popular with budget-conscious consumers -- especially during the holiday season, is making a big comeback.

For people who are unfamiliar with the concept or were born after the 1980s (when installment plans gave way to credit card purchases and other types of financing), layaway is a simple way to purchase merchandise -- interest-free -- over time. Consumers select the items they want to buy from a retailer offering the plan, make a deposit, which often includes a modest service charge, and pay for the merchandise over a specified period. Once the item has been paid in full, the retailer releases the goods to the consumer.

While there's no doubt that today's shaky economy has contributed to the revival of layaway plans, economists and representatives of several of the nation's leading retailers and layaway providers -- Sears, KMart, Burlington Coat Factory, Marshall's, TJ Maxx, Toys R Us and Hallmark -- insist that the recession is only part of the story. For retailers, layaway plans open the doors to millions of new customers who would not be able to make purchases without them. For consumers, paying in installments is increasingly viewed as a sound financial tool for purchasing necessities and managing expenses, particularly during the holiday season.

Overall, layaway plans are heavy on benefits, including:

* No fine print: For the most part, retailers' layaway plans are straightforward and easy to understand.

* No credit checks: Credit checks are not required to enter into a layaway contract, making it a great option for people who are trying to rebuild their credit due to foreclosure or past credit card problems.

* No need to leave home: Some retailers have launched e-layaway programs, making it possible for consumers to purchase online over time.

There are only a few drawbacks to layaway plans, but they are worth noting:

* Missed payments: Making payments -- and making them on time -- is the key to a successful layaway purchase. The penalty for missing payments is the cancellation of the layaway contract. However, most plans offer a seven-day grace period for missed payments. It is important to know the details of each retailer's plan before signing a contract.

* Missed sale prices: For shoppers who count on cashing in on Black Friday sales, layaway might not be an option. Some retailers don't offer Black Friday prices to layaway customers, so it pays to check with the stores you plan to patronize before the holiday shopping season begins.

Courtesy Metro Creative Connection