What is a layaway?
Layaway is a way of breaking down payments over time when buying a product.
Layaway is often used for big-ticket items, such as electronics (e.g., computers and TVs), jewelry, appliances, and furniture.
How it works
A store will put the item on hold after the customer puts down a deposit. The customer can then pay off the remaining balance over time. This ensures the item will still be in stock by the time it is paid off.
Layaway Process (chart)
Find an item you want
Take it to Customer Service, the Layaway department, or the register in the applicable department. Some retailers offer layaway online.
Pay a deposit to hold the item. This may be an amount of your choosing, a flat dollar amount, or a percentage of the price of the item.
Choose your repayment term, which is usually 8–12 weeks.
Make small payments over time, weekly, biweekly, or monthly.
Once you pay off the full price of the item plus any additional layaway fees, you can pick up your item.
Important To Note
Layaway is not always the best option for buying a product. It is best suited for consumers who have limited disposable income and are unable to pay for expensive products up front. It is also useful for those who do not qualify for credit cards due to poor credit but who would still benefit from flexible repayment terms.
Since different stores charge different fees and have different repayment requirements, it is important to check the terms of any layaway program you consider using.
Layway - Benefits and Drawbacks
|Allows you to spread out large costs over time.||Stores often charge a service fee of $5–$15 for holding a layaway item.|
|Makes large purchases accessible to low-income populations.||Down payments can be 10%–20% of the cost.|
|May encourage better budgeting. You’ve already put some money down and have agreed to make periodic payments, so you have to be sure you can meet that obligation.||If you don’t make your payments on time or decide to cancel the hold, you may have to pay cancellation and/or restocking fees and forfeit the original service fee.|
|Purchases don’t accrue interest as they would on a credit card.||Strict repayment terms; for example, you may have to physically drive to the retail location every week to make payments.|
|Ensures that an in-demand item is available if you can’t pay for it up front.||Not all items are eligible at all retailers; for example, you may be limited to electronics, jewelry, or appliances.|
|Easy to qualify. You just have to show ID confirming that you are over 18; no credit check required.||You may end up paying more for the item because you stop looking for sales once it’s on hold.|
Layaway vs. Credit cards
Layaway Pros and Cons
|No interest.||Additional fees and no return of fees if you change your mind.|
|No credit check.||Doesn’t build credit.|
|Accessible to those with poor credit or low income.||You may have to make payments in person at a store on a strict schedule.|
|May result in a lower total cost, even with fees, than a credit card purchase that accrues interest at a high rate.||If you miss a payment deadline, your layaway is considered cancelled (usually after a 7-day grace period). You will have to pay any cancellation or restocking fees, but the money you’ve paid for the item will be returned.|
|Doesn’t hurt your credit if you cancel or miss a payment.||Some retailers only offer layaway during peak seasons, such as Black Friday and Christmas.|
Credit Cards - Pros and Cons
|Helps build your credit score.||If you change your mind, you have to return the item (subject to store policy) and wait for the charge to be reversed.|
|Allows for flexible payment amounts and no down payment is necessary.||If you don’t pay your balance within the grace period, you will be charged interest.|
|Only requires monthly payments made from home at your convenience.||If you miss a payment deadline, you’ll be charged a late payment fee, which can be $30 or more. You will still have to finish paying for the item.|
|You can take the item home right away.||If you fail to pay your balance on time, your credit score may suffer.|
|Potential for earning reward points, cash back, or airline miles.||If you're not careful with your spending habits, you may take on more debt than you can repay|
Stores offering layaway
Some of the most popular retail chains offer layaway programs, with varying terms, conditions, and fees. This enables them to reach a lower income demographic that would struggle to shop there otherwise.
- Burlington Coat Factory
- Marshalls and TJ Maxx
- Layaway allows customers to pay for an expensive item over time, often with an initial deposit of $1 or less.
- It is useful for those with little disposable income but isn’t always the cheapest option due to fees.
- Layaway offers some of the same benefits as a credit card but doesn’t require a credit check. On the other hand, there are benefits to using a credit card that layaway doesn’t provide, such as the ability to earn rewards or build credit.
- Many popular stores offer layaway, particularly around the Christmas holidays, but each store has different terms.
- A “Secret Santa” paid off more than $46,000 in layaway at a Walmart in Pennsylvania in 2016, paying off the purchases of 194 strangers.
- Pay Away the Layaway is a nonprofit group that pays off layaway debts at different retail locations every year since its founding in 2011. In 2016, the group paid more than $100,000 toward lucky strangers’ purchases.