Layaway Plans

There’s going to be lots of shopping happening in the next two months for obvious reasons that I don’t want to talk about yet because it’s still October and I am holding on to that for now, and Alex Tabarrok at Marginal Revolution had a little rant this morning about why layaway plans are so terrible despite consumer advocates saying they’re great.

One of the biggest retailers pushing their layaway plans right now is Walmart. This is how it works: You see a thing you want to buy (or perhaps a bunch of things you’d like to buy as gifts), but you don’t have enough money and you don’t want to make a purchase on credit. So you put the items on layaway and pay a 10 percent downpayment. Then you make payments until December until everything is paid off and you’re ready to pick up your items. If you cancel your layaway plan, you get your money back less a service fee of $10.

Consumer advocates say that they like this because it allows you to make a purchases without having to rely on high-interest credit cards, or don’t have credit cards because you’re unbanked or have bad credit. Tabarrok hates this because you could essentially do the same thing by putting money into a savings account or piggy bank and then buy what you want when you have enough money and not worry about paying a service fee. He also doesn’t think people should worry about a store running out of something because they didn’t put it on layaway.

Are we living in the Soviet Union? Who worries about Walmart and Kmart running out of goods? Occasionally an item will be discontinued but then the replacement is usually better and/or cheaper. Similarly, layaway plans advertise that you can “lock-in” the current price. Right, and if the price goes down or you find a lower price elsewhere you are similarly locked in.

I’m pretty sure my parents used layaway when I was a kid and had no problem with it. Perhaps the incentive to go through with the plan is stronger than putting money in a general savings account to buy things you want later. Whatever works!

Photo: Fan of Retail

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