Americans could learn an important lesson in economics this holiday season from the growing popularity of layaway plans -- live within your means.
"Americans are saving more money right now than they ever have, just because of fear and the unknown," said Charles Hixon, director of the Consumer Credit Counseling Service of the Partnership for Families, Children and Adults in Chattanooga. "That layaway feature allows you to go ahead and pay up front and not produce more debt, and that's what consumers are trying to stay away from right now."
National chain retailers such as Kmart, Sears and Toys R Us have had layaway plans off and on for years, but this year many stores are promoting them more than ever.
"Layaway has been very successful," said Jason Ring, manager of Kmart on Highway 58. "It really helps give (parents) a way to get gifts for their kids, and it gives them a place to hide them."
Electronics and toys are the most popular items put on layaway, he said.
Chattanooga resident Pam Riley remembers having gifts on layaway as a child. Buying presents on layaway was the only way her family managed the holiday season with six children in the family, she said.
Layaway was a good strategy for her when she bought gifts for her two sons, now 17 and 20.
"My boys snooped, and layaway was a good way to keep their gifts hidden," she said.
Layaway helps buyers avoid using credit cards and enables shoppers to get their hands on popular gifts before they are sold out. She would use layaway now to buy clothes or other items for herself if more stores offered the option, she said.
"There are a lot of people now who need layaway programs to get Christmas gifts," Mrs. Riley said.
Like Mrs. Riley, most holiday shoppers are looking to score bargains this year. The National Retail Federation estimates that shoppers plan to spend an average of $682.74 on holiday shopping, a 3.2 percent drop from last year's $705.01.
To appeal to shoppers who plan to adjust their holiday spending, Kmart is offering online layaway this year, Mr. Ring said. When customers place orders online, they choose the store they would like to pick up their merchandise from and an employee pulls it off the shelf and sets it aside.
The terms of layaway plans vary from store to store, but most allow consumers to make payments for 30 days with a 10 or 20 percent down payment. Payments are made weekly in an agreed-upon amount, and if they are not made within a predetermined amount of time, the merchandise is returned to the floor.
retail chains with layaway plans
* TJ Maxx
* Toys R Us
* Babies R Us
Source: Individual companies
When considering a layaway purchase, watch out for:
* Hidden fees: They can range from $5 to $150. Most layaway plans also charge a cancellation fee and some charge service fees of $5 or a small percentage of the merchandise total. Make sure you know about all fees before you sign up.
* Price adjustments: Check whether the store honors price adjustments should one or more of your items go on sale during the layaway period. Often, the adjustment period is limited to a couple of weeks or less.
* Choose your store carefully: Like gift cards, layaway payments could become useless if a store goes out of business.
* Check out local mom-and-pop stores: These clothing, jewelry, consignment and second-hand stores may offer their own layaway plans with less fees.
Source: ShopSmart Magazine; McClatchey Newspapers