Layaway grew out of the Great Depression, where consumers could set aside goods they wanted and make regular installments until the debt was paid and they got to take the goods home.
The concept got shoved to the back of the storeroom in the 1980s, as easy credit begot a get-it-now, pay-later consumer culture. In recent years, retailers have put gift cards and their own profitable credit card rewards programs at center stage, turning layaway into an expensive, space-hogging, antiquated service.
Layaway is good – unlike credit cards, you are working forward financially towards a goal instead of backwards. There is also less temptation to buy something now and think about how you are going to pay for it later. For young adults, this could be a whole new paradigm.
One thing that really excited me in the article was this new online development:
More than 1,200 merchants have turned to eLayaway, including Brookstone, Gap, Dell, HP, Apple Store and Bass Pro Shops. Two as-yet unnamed big-box retailers will become part of eLayaway’s virtual mall “very soon,” said Michael Bilello, senior vice-president of business development of the Tallahassee, Fla.-based technology company.
Like traditional in-store layaways — which have fees and cancellation penalties — customers of eLayaway pay a 1.9 percent transaction charge. Shoppers can stretch payments for three months to a year. Payments are automatically withdrawn electronically, and once the item is paid off, it’s shipped to the customer’s home.
If you check out the eLayaway site, they have a pretty attractive line on the homepage – “Debt-free credit building at its best!” And if you click around, you’ll see pretty much anything and everything.
What does this mean for credit unions? Consider a “layaway loan” to members - basically a loan in reverse. For loans for relatively small sums of cash, this could be a way to curb rising debt and boost responsible money management.
Out of curiousity, I did a quick Google Search for “layaway loan” and naturally there are already a few credit unions doing something similar (no banks…):
Think about it – in these economic times, this is another way for credit unions to leverage their difference by offering something….different.