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The pros and cons of layaway

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MABLETON, Ga. -

It's a practice with its roots in the Depression, but the current economic crisis has layaway making a comeback. Is it the best way to make purchases?

Mableton shopper Brenda Pressley is on a mission at K-Mart. She's shopping for Christmas presents, and instead of checking out at K-Mart's register, she heads to the Layaway Department.

"Layaway was fairly popular until about two decades ago, and then with the aggressiveness of unsecured credit cards, really layaway started going away in lieu of unsecured credit cards," said John Ulzheimer of Smartcredit.com.

"We have apparel. We have electronics, toys. There's really not a lot of restrictions on our layaway as some of the retailers have," said Bill Bonsor of K-Mart.

At K-Mart, layaway never left. But other big box retailers stopped offering it. But in the wake of the recession, customers and retailers are again in love with layaway. Ulzheimer says for many it's the best option.

"The fee that you're going to pay is usually fairly low, maybe $5. They're calling it kind of a convenience fee to set up the paperwork to do the layaway. That's much, much less expensive than you're going to pay if you charged on a retail store credit card and paid between 20 and 25 percent interest," said Ulzheimer.

Pressley says she uses layaway because of convenience.

"That way you don't have to hide it at home, or wrap it up. Just get it right before Christmas," said Pressley.

If you're trying to build good credit, layaway might not be much help. Layaway payments aren't reported to the credit bureau.

"If you are a responsible credit card user and you're not revolving a balance every month and paying interest, that's still probably the best way to do it. But the layaway is pretty decent option because of no interest, and you're likely to pay less for it over time," said Ulzheimer.

Nearly all major retailers are now offering layaway. K-Mart has waived the layaway service fee until November 17. K-Mart is also the only mass retailer to also allow layaway online.

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