Layaway as a Substitute for Poor Credit Credit Cards
The nation’s credit card debt totaled $972.73 billion by the end of 2008, according CreditCards.com.
That’s $8,329 per household – and consumers might think that more department stores would offer layaway to ease a credit crunch. This is especially important to people with low credit scores who get saddled with the high interest rates of poor credit credit cards.
Think again, at least in Frankfort.
Of seven major department stores locally, only Kmart and Sears offer bona fide layaways.
Kmart always had a layaway and Sears began offering it around Christmas last year. Both are owned by Sears Holdings Corp. and offer similar plans, store officials say.
Customers pay 10 percent down on purchases and a $5 service fee at Kmart. At Sears, customers pay between 15 and 20 percent up front.
Both plans have $10 cancellation fees and span eight weeks, with remaining balances spaced by the time frame. Customers must make payments at least once every two weeks.
Layaway does not involve a credit check, according to store officials. Items are held until they’re fully paid and there’s no interest.
“I just think it’s more convenient than anything,” Kmart associate Judy Jones told The State Journal. “People enjoy knowing they have a product guaranteed on hold.”
She added that with Christmas coming up, layaway gives customers an affordable alternative to buying gifts on credit.
Jones says the store sees four to five new layaways on a weekday. Weekend layaways balloon to between 15 and 20.
Many parents took advantage of Kmart’s layaways as school approached, Jones said.
“A lot of parents put back-to-school clothes on layaway as well as school supplies,” she said.
Sears’ human resource official Donna King says the store decided to continue its layaway after Christmas last year, and its layaways dwindled recently. Sixty percent of people cancel them before the items are paid off.
“People mostly put clothes on layaway,” she said. “After about six weeks, clothes start to go on clearance, so it’s cheaper for people just to buy their clothes then rather than keep making layaway payments.”
With TVs, King says price drops don’t happen as quickly or regularly, so they stay on layaway more frequently. Only “two or three” are on layaway right now.
King says Sears will likely see an increase in layaway during Christmas, especially on their hard-line items – TVs and other appliances.
Offering layaway is a way for customers who aren’t eligible for credit cards or with poor credit history to purchase items, she said.
“Some people don’t qualify [for an in-store credit card], so layaway is an option for them.”
Sears still offers a store credit card, and products can be paid in 12-month or 18-month deferred payments, depending on the items.
While other major department stores don’t offer total layaways, Walmart and Big Lots have some form in select departments.
Walmart still offers layaway on jewelry, but ended the practice as a whole in 2006. Big Lots offers a similar program on furniture, according to a sales associate.
Other department stores – Kohl’s, JCPenney and Elder-Beerman, either declined comment or cited company policy when asked why they don’t offer layaways.
Source: The State Journal, Frankfort, KY
Leave a Reply