Remember the Layaway? Its back!

Before the credit card there was the "layaway." Layaway is a riskless form of consumer financing that has been in decline over the years with K-Mart, Burlington Coat Factory and Marshall's among the remaining large retailers that still offer the service.

Layaway is a simple concept. The customer makes a deposit, usually with a modest service charge included, and the merchant puts the goods aside, or lays them away and does not release the goods to the consumer until they are paid for in full.

Layaway plans are making a comeback, according to a recent article in The Economist. A website, eLayaway, updates the concept to the internet age. It helps users find the right retailer with the right merchandise and the right layaway plan. Then eLayaway sets up automated payments from the customer's bank account to the retailer. The payment platform is designed and maintained by HSBC.

Layaway is an attractive means for people to spend more responsibly, and at less overall financing cost. My parents used layway before the credit card era and to this day still exercise the discipline with their card that layaway instilled. eLayaway offers an internet version of the layaway plan, with a 1.9% service charge, but payments are drafted automatically from the purchaser's bank account.

Layaway could be a frugal option for families who are not using credit cards for some reason, enabling them to take advantage of great bargains even if they don't have the full purchase price on hand. Layway helps frugal behavior by discouraging overspending that credit cards can do and it forces the buyer to ask that question, "Do I really need that thing?" And one can always opt out, for the cost of the service charge, if things get tighter.

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