Layaway makes a comeback, with fees and benefits

— -- Layaway is becoming increasingly popular with stores and consumers, despite fees and often-confusing rules.

Toys R Us said Tuesday that it is expanding its layaway program starting Oct. 15 to include all toys, not just more expensive items such as swing sets and electronics.

Walmart offers layaway again Oct. 17 for toys and electronics after stopping the program in 2006 for anything other than fine jewelry.

Layaway lets shoppers put an item on long-term hold and pay in installments. Stores that offer layaway typically allow merchandise to be held up to three months. Minimum purchase amounts vary.

A new survey by the product research website ConsumerSearch.com found nearly half of 1,000 consumers polled reported using layaway at least once in their lives and a third said it is "great stores are bringing back layaway."

Those who choose layaway at Sears and Kmart "tend to be customers on a paycheck to paycheck basis" who don't have access to credit, says Salima Yala, V.P. in charge of layaway and gift cards for Sears Holdings, which also owns Kmart. But Yala says it also includes many who simply don't want to use credit cards.

Parents will sometimes put several Matchbox cars on layaway or back-to-school clothes and supplies, Yala says.

Among the stores that offer layaway: TJ Maxx, Marshalls and Best Buy.

ConsumerSearch Editor in Chief Christine Frietchen and consumer debt experts urge consumers to pay close attention to the fine print.

"The service fee at most stores runs $5, but there are restrictions and exclusions everywhere, and they are not consistent from store to store," says Frietchen. "Consumers need to factor in the service fees, and plan carefully. Understanding cancellation fees is critical."

At Toys R Us, for example, customers must pay a $5 fee and put down at least 20% in advance. They have 90 days to pay for the item in full. All layaway orders must be paid off by Dec. 4, and there is a $10 charge for cancellations

More than a third of survey respondents said they would be more likely to use layaway if the fees were dropped. Yala says service fees cover the "labor involved in putting those things back in the back room" and the risk the retailer takes by removing items from sale.

"For people who are not overspenders, layaway makes a lot of sense, because it helps them budget and plan ahead," says Olivia Mellan, a psychotherapist and "money coach" in Washington, D.C.

But for people who are in financial trouble because of spending, layaway's low payments could "fuel an addictive spending pattern," says Mellan, author of Overcoming Overspending.

Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling, also recommends paying close attention to rules and fees. But she notes layaway can keep consumers from having a "holiday spending hangover."

"It is highly likely that the layaway fees are less than the interest would be if the bill were not paid in full upon arrival," says Cunningham. "This earns them significant bragging rights over their friends who charge their holiday purchases and spend the next few months paying for them."