ConsumerWatch: Bay Area Retailers Bring Back Layaway Plans

(CBS 5) - With the holiday shopping season underway, there are indications that consumers are spending less or at least within their means.

According to a National Retail Federation survey, less than 28 percent of  holiday shoppers reported they plan to use their credit card – the lowest since 2002.  The survey also showed more consumers plan on using cash or debit cards. 

Retailers such as Kmart, Sears, Marshalls and Toys R Us are capitalizing on the spending reluctance by offering layaway plans.

Marketing expert Kathleen Kusek said this old holiday tradition is slowly making a comeback. "Now that consumers are becoming more savvy about credit cards and more reluctant to spend money on interest rates, layaway has gotten more appealing," said Kusek.

Not only can consumers avoid credit card fees by using this option, Kusek added it allows families to create a budget. "What layaway does is force consumers to save and pay in increments to get something that they really want," she said.

Kusek noted there are also some drawbacks to these pre-payment plans. For instance, there are initiation fees that range from $5 to $10 depending on the store and a down payment anywhere from 10 percent to 20 percent due up front.

According to the Better Business Bureau consumers should also ask what happens if a layaway item goes on sale, if you decided to cancel and the total fees involved. "You need to find out what those layaway policies are because what could turn out to be a very nice thing could backfire, said Gene O'Neil, President and CEO of Golden Gate BBB.

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