Layaway is a method of consumer financing, most popular among large retailers during the mid-20th century.

In stores that offer layaway programs, a shopper who wishes to purchase an item but does not have enough cash available to pay its full purchase price can "lay away" the item by putting down a deposit, usually around 10% of the total price. The store will reserve that item, usually in a distinct storage area, preventing others from buying it. The customer then will make periodic payments to the store until he has paid the full purchase price, at which point he can then take the merchandise home. If the customer's financial situation changes, the store can usually cancel the layaway and refund the money paid so far.

In theory, a consumer could just as quickly and easily save money on his own and pay in a single lump sum payment when he had enough. Layaway thus does not directly enhance consumer purchasing power, but instead operates similar to "Christmas Club" bank accounts, encouraging saving by making it a regular, formalized process. Customers might also derive some benefit from the ability to reserve an item before it might be sold out, and many noted an advantage in buying Christmas presents this way, as the merchandise was held at the store and could not be discovered early by inquisitive children.

Layaway first rose to prominence in America in the mid-20th century, as department stores and other large chain retailers came to dominate the commercial landscape. Historically, consumers had often been able to make large purchases on credit from local storekeepers, who could use their relationships with regular customers to judge credit risk and ensure collections. As retailers grew in size, however, they became unable to extend credit to their larger and more anonymous customer base. The golden age of layaway lasted from about the 1950s to the 1970s, where it was common in most large stores, allowing them to expand the potential customer base for big-ticket items like jewelry and appliances.

What caused the subsequent decline of layaway, to the point where very few stores offer it today, was the return of consumer credit. The development of credit agencies and consumer debt-backed financial instruments made it practical again for stores to offer credit on a grand scale, once again allowing customers to buy now and pay later. Customers liked the ability to take merchandise home immediately, and retailers liked the profits to be made from interest payments - it was not unknown for stores' financing divisions to generate more profit than their actual retail operations. Even if interest payments went to third party credit card issuers, stores would prefer to be paid immediately rather than several months down the line, and relished the opportunity to cut down their layaway programs' storage and staff expenses.

As it stands, very few department stores and almost none of the category killers still offer layaway; those stores that do still operate programs, like Kmart and Wal-Mart, tend to be low-price retailers which disproportionately serve poor customers unable to obtain credit. The recent rise of deferred credit (think of all of those "Buy now and enjoy no payments and no interest for twelve months!" offers) seems to offer a combination of the immediate convenience of credit with the interest-free thrift of layaway, but customers should note that if they are unable to pay off their balance by the end of the grace period, they are usually assessed high interest rates retroactive to the date of purchase.

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