Layaway

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What is a layaway?

Layaway is a way of breaking down payments over time when buying a product.

It is a way of purchasing an item in installments rather than using a credit card or in-store financing, which charge interest.

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

Layaway vs. Credit cards

Layaway Pros and Cons

Credit Cards - Pros and Cons

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.

  • Kmart
  • Burlington Coat Factory
  • Walmart
  • Toys-R-Us
  • Sears
  • Marshalls and TJ Maxx
  • GameStop

Summary

  • 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.

Fun facts

  • 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.

References

  1. http://www.investopedia.com/terms/l/layaway.asp
  2. http://www.huffingtonpost.com/creditcom/layaway-plans-what-you-ne_b_1854353.html
  3. https://dealnews.com/features/Holiday-Layaway-May-Cause-Shoppers-to-Miss-Out-on-Deal-Savings/862389.html
  4. http://www.bankrate.com/personal-finance/smart-money/8-essential-things-to-know-about-layaway/#slide=1
  5. https://money.usnews.com/money/personal-finance/articles/2014/11/06/what-to-consider-before-starting-a-layaway-plan
  6. https://www.consumer.ftc.gov/articles/0128-using-layaway-plans
  7. http://www.moneycrashers.com/stores-offer-layaway-plans-shopping/
  8. http://www.firstcoastnews.com/news/nation/secret-santa-pays-off-more-than-45000-worth-of-walmarts-layaway-items/368249174

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