Shoppers might hear a new refrain at the register this coming holiday season: Will that be cash, credit or layaway?

In an era when consumers are practicing frugality while retailers tempt them to spend, a number of larger merchants are bringing back layaway, that seemingly old-fashioned method of paying over time for purchases.

Just earlier this month, Walmart announced it is bringing back layaway for the holidays. Sears, which revived layaway in 2008, is pushing it now in advance of the Christmas season.

The return of layaway should be viewed as a good thing for consumers, experts said, as it offers advantages.

“I think this will stick around even if the economy improves,” said Ludwig Bstieler, an associate professor of marketing at the University of New Hampshire. “Overall for consumers, it seems to be low risk.”

And layaway has reemerged with online tools and websites that make the process even more consumer friendly.

For those who haven’t experienced it, layaway functions as a payment plan in which customers make a down payment to reserve merchandise for a small fee and pay it off periodically. When the bill is settled at the end of the contract, customers can take the merchandise.

Layaway works at most stores for one item or for multiple items. Thus, shoppers at Sears can put a washing machine on layaway or $300 worth of back-to-school clothes and work toward paying off the total sum.

The practice originated in the 1920s, Bstieler said. Even Ford Motor Co. had a version of layaway for automobiles. It became a fixture in department stores like Marshall Fields and Montgomery Ward while Depression-era thrift ethos reigned.

The advent of credit cards started making layaway obsolete. As credit lines became easier to get and debit cards came on the scene to tap directly into checking accounts, stores gradually began dropping layaway services.

And that remained true until 2008, when the economy sank and banks immediately began tightening lines of credit.

Today, Bstieler said larger stores are more likely to offer layaway, given it requires administration, paperwork and, in some cases, storage of merchandise. But he said smaller stores are offering it more these days as well, so it doesn’t hurt to ask.

Some say consumers will continue to turn to layaway as more than a method of teaching teenagers how to budget their money. Sergio Pinon, founder of the website eLayaway.com, is counting on it.

“People are getting smart,” he said. “They’re actually looking at their credit card statements and realizing how much they’re paying in interest on a purchase.”

Advantages like avoiding a credit card balance — and the interest that comes along with it — while paying off that new washing machine are what Pinon and others want consumers to know about.

Consumer advantages

Keeping purchases off the credit card is one of layaway’s biggest advantages. Fees for layaway plans are usually modest. Walmart, for instance, charges $5, although the total purchase must be at least $50.

Using a layaway plan, Bstieler said, prevents dings on your credit score from carrying a high credit card balance and keeps that line of credit open for emergencies.

By steering shoppers away from credit cards, layaway plans are also bringing back the old-school notion of budgeting ahead.

“This gives people more control over their spending,” said Salima Yala, divisional vice president of layaway for Sears Holding Corp., which owns both Sears and Kmart. “This is not impulse spending. This is well-thought-out spending.”

At the Sears in Bend, General Manager Kristina Van Hook said customers use layaway for merchandise they don’t need immediately but know they will want in a few months. They shopped for back-to-school supplies in June and July, are now making payments on snow throwers and are starting to shop for Christmas.

For those who can’t make gift-giving decisions before the snow flies, merchants like eLayaway.com are pushing gift cards.

Pinon said gift cards have been a popular option this year. For example, shoppers might gradually put money on a Best Buy gift card. By the time Black Friday rolls around, they already have $500 set aside for the holidays.

“They don’t know what they’re going to buy when they load the card, they just know they will shop there,” he said. “With a gift card, you can shop at the last minute.”

Layaway’s future

Retailers are trying to bring 21st-century flair to this age-old service.

Yala said Sears wants to expose younger shoppers to the concept. One scenario she envisioned is parents buying goods on layaway for their child going away to college, then picking them up in a store location in that university town.

The other way retailers are evolving layaway is to move it online.

Sears allows layaway customers to order and pay on the Web. And online companies like eLayaway have also gotten into the game.

Pinon said eLayaway, which launched in 2006, partners with businesses that don’t maintain their own layaway programs to offer the service for a fee. The goods on the site range from electronics to NFL tickets to vacations.

The company makes money by charging a 1.9 percent fee on the total spent, or $1.90 for every $100.

He added that younger customers like that they can choose how long they take to pay their purchases off.

“It’s not always long term,” he said. “Sometimes it’s just a matter of one or two payments.”

Even though layaway seems simple and safe, customers should keep a few things in mind while using the service.

Buyers should be mindful of the sort of goods they put on layaway, particularly when it comes to technology.

“By the time you’ve paid off your plan, your cell phone is three generations old,” Bstieler said.

The Better Business Bureau advises that customers read layaway contracts and understand the store’s policies before signing. There are likely fees for missed payments or cancellations, and it’s important to know whether the store will give money already paid back.

Another good question to ask is what happens if an item goes on sale after its been put on layaway. Sears, for instance, will change the contract to the sale price for up to two weeks after signing.

While some see layaway expanding as hard times continue and merchants want to cement relationships with their customers, others say it may remain limited to certain types of stores.

Bstieler said he doubts that higher-end merchants will start offering layaway again, as their clientele likely has the means to pay off purchases.

“In reality, the layaway plan goes against the grain of retailing,” he said, “which is to move product as quickly as possible.”

Ask before signing

When buying items on layaway, the national Better Business Bureau advises shoppers to get everything in writing. Also, ask the following questions before signing a contract:

• How much time do I have to pay off the item?

• When are the payments due? Must I pay only at the store, or can I also pay online?

• How much do I have to put down?

• Are there any storage or service plan fees?

• What happens if I miss a payment? Are there penalties? Does the item return to inventory?

• Can I get a refund or store credit if I no longer want the item after making a few payments?

• What happens if the item goes on sale after I’ve put it on layaway?

Source: Better Business Bureau