Like lots of people, Marjorie Barker, a dental hygienist in Encino, Calif., has spent many a Christmas season racking up credit-card debt. Come January and February, she and her husband, Mike, a warehouse manager, have typically tightened their money belts to pay for their holiday binge. By late spring, as sure as the tulips bloom, their finances seem manageable again— just in time to start thinking about paying for summer camp for her two boys. "I get like a whole month where we have a decent surplus in the bank and it's really nice," says the mother of Josh, 12, and Jeremy, 10.
But this year will be different for the Barkers. Marjorie's hours at work have been cut, her credit cards are nearly maxed out and her husband is fearful of layoffs next year. This season, the Barkers, along with many Americans, are turning to layaway to get through Christmas. "In the last few weeks I've put all of the boys' presents on layaway. Every single one," says Barker, standing in line Kmart counter last weekend, videogames and a remote-control car in hand. "It's the only way Santa will be able to afford Christmas this year."
Layaway, that throwback to simpler times when you'd find something to buy and hand it to a store clerk for safekeeping for 30 days or until you paid it off and took it home—whichever came first—is back. Among retailers, the practice had fallen out of fashion in the last decade as consumers increasingly opted for the instant gratification—and interest payments—of credit-card purchases. Wal-Mart even got rid of the practice two years ago, to the dismay of some customers. But this year, with credit tight, it's back, thanks in large part to Kmart, which has expanded its program (60 days instead of 30 to pay for your gifts) and is marketing it heavily in television commercials starring the likes of Kate Gosselin, the mother of twins and sextuplets and co-star of "Jon and Kate Plus 8" the popular, family-friendly reality show about their life. "I like it because it's allowed me to get a jumpstart on my shopping, get the 'hot' holiday gifts and make payments for them over time. It also keeps the gifts out of the house and away from 16 wandering eyes," she tells NEWSWEEK.
To be sure, Kmart is paying Gosselin to give such glowing support to its initiative. But Maura Espanosa, a single mother from Chula Vista, Calif., has no loyalties beyond her pocketbook. "I don't really have much credit yet, so I'm using layaway to buy presents," Espanosa says. "It's good because you make payments on things you buy, but there's no interest. I'm surprised more people aren't doing it."
Actually, more people are. It's too early for retail sales numbers, but seem clear that layaway is catching on, Kmart says; other chains, including Burlington Coat Factory and Sears, agree. An online layaway service, eLayaway.com, that administers accounts for 1,000 retailers, says its business has increased by double digits in the last year. "We know that 40 percent of consumers actually start holiday shopping before Halloween," says Scott Krugman, a spokesman for the National Retail Federation, a Washington, D.C.-based lobbying group. With that in mind, layaway "is definitely something that's much more prevalent this year, especially with credit being so tight." The earlier stores can wrap up their piece of the holiday spending pie, the better. Though it may be difficult to go a day without hearing tales of consumer woes due to profligate credit card spending, layaway is one form of credit that even retail critics can support. "It's safe. If you think about it, this is the way people used to buy—you bought stuff and took it home when you had the money," says Edgar Dworsky, founder of Consumerworld.com, a consumer resource guide.
Not that there aren't potential drawbacks. For one, committing to items early means foregoing the decent possibility—especially in this economy— that store inventory will be discounted as the holidays draw nearer. And for most layaway services, retailers typically charge a fee—$5, say—along with a deposit on the item being held. If you don't actually pay for the item in time, or change your mind, that money is gone and there may even be a cancellation and restocking penalty.
Of course, if you really want to save, you could always try Bob Saar's method. Saar, a writer from Burlington, Iowa, has devised his own layaway system that he says he developed over several tight Christmases. "It's simple. As you navigate the first 11 months of the year, keep your eyes open. When you see something that would make a good present for someone, buy it, label it with a name, and put it in your Christmas closet." Even cheaper: just send cards.