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Layaway: The new debt relief strategy may just hide the problems

It seems that we hear almost daily of a new government program to combat debt relief, particularly with respect to spiraling credit card debt and foreclosure actions. It also seems that most of the programs have not been successful. Of course, businesses are still looking for ways in which to make a profit in difficult economic times. Some retailers have turned to an old sales strategy to combat current economic woes. Prevalent in the post-war era before the popularity of credit cards eclipsed it, layaway is now making a comeback as a means of achieving debt relief in New Jersey and across the country.

The concept behind layaway is to avoid the use of credit cards. Rather than purchase something on credit, buyers make payments towards a purchase before acquiring the item. Retail giants have dusted off the program and reemphasized it in an attempt to attract buyers they might not otherwise be able to service. One downside is the business must store the item until payment is made, resulting in additional costs to maintain the inventory. But retailers have clearly decided that is a necessary business expense to stay competitive.

For buyers, layaway offers several advantages, not the least of which is the program will not increase credit card debt because no credit card is used. Also, those doing their Christmas shopping for young children like the idea that they do not have to hide gifts from prying eyes before Santa Claus makes his appearance. But it may also lead to struggling families paying more for items than they might normally because they do not have to pay the entire cost up front.

While layaway has its pluses and minuses, what it does not do is offer debt relief for obligations already incurred. In fact, it may offer an excuse to avoid those payments in favor of additional purchases that might not be within a family’s budget.

Source: The Virginian-pilot, “Layaway makes comeback amid debt- tight finances,” Carolyn Shapiro, Nov. 13, 2011

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