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Smart Buying

The Return of Layaway

With shoppers on a tight budget this season, more retailers are bringing back the installment-payment method. Here's where you can find it, and how it works.

You'd have to be TV-free to have missed Kmart's commercials over the past month touting the company's layaway program. Starting in October, the low-price retailer made a big push to get layaway noticed -- although Kmart has had layaway for 40 years. So why now?

As the economy's tailspin continues, Kmart figures customers will want a prudent way to pay. Layaway lets you select the stuff you want now (while it's in stock) and pay for it over time. By the time you take your purchase home, it's paid off, which means one less credit-card surprise come January.

In a recent PersonalShopper.com survey, almost half of the respondents said they're not looking forward to holiday shopping because they're afraid they can't give the gifts they want without maxing out their credit cards.

Layaway forces shopping discipline. Says Ludwig Bstieler, associate professor of marketing at the University of New Hampshire's Whittemore School of Business and Economics: "There is a segment of consumers who have a hard time paying their bills. In times like these, that group grows larger, and layaway offers them a way to purchase something without going beyond their means."

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Tom Aiello, a spokesman for Kmart and Sears, agreed, but says that the cash-strapped aren't the only customers seeking other options. "There's this whole movement of frugalistas," he says. "It's suddenly hip to be frugal."

A comeback

This month, Sears brought back an expanded layaway program -- it covers most store items -- that the company had axed in 1989. The program is just a trial, though -- it will run only through Christmas for now, and it does not affect the company's fine-jewelry layaway program.

You can also do layaway online. Web sites set up layaway programs for merchandise they buy through partner e-tailers. Once you're paid the bill in full -- payments can be deducted from your checking account -- the item is shipped to you.

Because layaway programs are expensive to administer and represent only a small fraction of business for the stores that offer them, Bstieler says we shouldn't look for more to come. Unlike the days of the Great Depression, when all the major department stores had layaway programs, credit is still king and the demand for instant gratification is high.

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But for the time being, layaway is a hot option, both in-person and online. Here's where you can find it, and some details on how the programs work:

In-person layaway

KMART
Layaway period: 8 weeks
Down payment: 10% of the total
Pay schedule: Biweekly
Fees: $5 service fee, $10 cancellation fee
Note: During the holidays, you can keep merchandise at the store after you've completed payment. Last day to pick up is December 24. There is a 7-day grace period for payment.

SEARS
Layaway period: Through December 23
Down payment: $15 or 20% of the total, whichever is greater
Pay schedule: Must be paid in full by December 23
Fees: $5 service fee, $10 cancellation fee
Note: Excludes home electronics and home appliances. During the holidays, you can keep merchandise at the store after you've completed payment. Last day to pick up is December 23.

T.J. MAXX, MARSHALLS and A.J. WRIGHT
Layaway period: 30 days
Down payment: 10% of the total
Pay schedule: Must be paid in full within 30 days
Fees: $5 service fee
Note: Layaway is not offered at all store locations. Layaways must be paid in full and picked up within 30 days. Other restrictions may apply.

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BURLINGTON COAT FACTORY
Layaway period: 30 days (90 days for Baby Depot merchandise)
Down payment: 25% of the total
Pay schedule: 25% due within 14 days, final payment due upon pickup
Fees: $5 service fee, $5 cancellation fee upon any change to layaway
Note: Layaway deposits and payments are nonrefundable, but may be converted to a gift card if layaway is canceled or returned. In Maryland stores, you can cancel within 7 days for a full refund, but after that you may be charged 10% of the price or the total amount you have paid, whichever is less.


Online layaway

eLayaway.com
Layaway period: You select the time frame
Down payment: First month's payment
Pay schedule: Monthly
Fees: 1.9% transaction fee, $5 fee for unsuccessful payment, $25 cancellation fee
Note: Payments are made via direct debit. If the original payment is declined for insufficient funds in your account, you have 7 days to get the money into your account, after which your layaway will be canceled and the money you have paid sent back, minus the cancellation and transaction fees. Shipping and taxes are included in the purchase price.

Lay-Away.com
Layaway period: 6 months
Down payment: First payment should be made within 14 days or your order may be deleted
Pay schedule: Monthly (total cost divided into equal payments over 6 months)
Fees: $25 insufficient-funds fee, $35 cancellation fee
Note: Payments can be made by mailing a check or money order, or by direct debit.

Layaway-Travel.com
Layaway period: 3 to 13 months, depending on the date of travel
Down payment: First month's payment books your trip
Pay schedule: Monthly
Fees: $25 insufficient-funds fee, $35 cancellation fee
Note: Payments can be made by mailing a check or money order, or by direct debit. Current vacation venues include the Caribbean, Mexico and Hawaii. A pay-as-you-go plan is also available, which allows you to contribute money toward a future, undetermined trip. As you accumulate a balance, you can book at any time.