Savvy consumers finance holidays with layaway, savings clubs

Jennifer Thrapp plays it smart at Christmas. She and her husband have three small boys, and the last thing they want is to go into debt at the holidays.

“We don't ever use credit cards for Christmas, never,” said Thrapp, 29, of Washington, Iowa. “We don't want to still be paying for Christmas in April.”

Instead, they put many of the boys' presents on layaway at stores that still offer the service, allowing the couple to pay a little at a time until just before Christmas, when they pay off the bill and pick up the gifts.

With record unemployment and an economy still in the throes of a recession, many holiday shoppers are financing Christmas this year with layaway services and Christmas clubs at financial institutions and trying to stay debt-free by simply shopping smarter.

“I've been really watching the ads and will be taking advantage of Black Friday sales,” said Lisa Owen, 42, of Solon. “We've been saving throughout the year and will use just that money.”

Owen said the year has been tough but hopes their four children won't know the difference on Christmas morning.

“My husband and I aren't exchanging gifts this year, and the adults in the (extended) family are drawing names,” she said. “We're definitely cutting back.”

Some stores have done away with the decades-old practice of layaway, a program that was started before the Great Depression, but others, such as Kmart, have kept it going because of its popularity. With layaway programs, consumers willing to wait to take a purchase home put it on hold and pay it off over time, usually six to eight weeks.

Managers at layaway counters say that, while no comparative numbers are available, they do seem to be much busier this year than in the past.

“We're having a lot of layaways this year, everything from big items like Wiis to smaller things, like children's clothing,” said Nancy Forrest, assistant manager at Kmart in Iowa City.

Forrest said layaway is often used to give customers more time to pay off an item, but sometimes customers use it to store gifts away from home.

Travis Weepie, manager of Sears at Lindale Mall in Cedar Rapids, said layaway was in its infancy at this time last year. Consumers are appreciative this year, however.

“It's been unbelievable,” he said. “I can't believe how much has gone on layaway already.”

Some shoppers plan for Christmas spending throughout the year, taking advantage of Christmas clubs at the bank or credit union. With a Christmas club, consumers can set an amount of money to be taken out of paychecks or transferred from another account each week or each pay period into the club account. That money remains virtually inaccessible - except for emergencies - until distribution day.

Tim Meier, vice president of marketing at Collins Community Credit Union, said this year's distribution date for Christmas clubs was Oct. 31. Total funds distributed - including six Cedar Rapids locations and one each in Marion and North Liberty - was $2.2 million. He said 2,357 people used the Christmas club this year, up slightly from last year's 2,354 participants.

“I know we're not unique in having a Christmas club, so if you take our $2.2 million and add it to whatever everyone else is distributing, that's a lot of money that is being funneled into the community,” he said.