You may remember your parents using layaway plans when you were young, or even taken advantage of one yourself. They’re a useful way to help consumers afford purchases during difficult financial times — first popularized during the Great Depression and again during the Great Recession. As the ongoing recession caused by the coronavirus continues into the holiday shopping season, millions of people will likely utilize layaway programs this year.
Are you considering using a layaway plan? If so, US News My Money explains what you should know before you start one.
What Are Layaway Plans And How Do They Work?
Layaway plans allow you to pay for purchases in weekly or monthly installments. Unlike credit cards, where you pay for the merchandise once you have it, the retailer holds on to your items until you make the final payment.
Like anything else, layaway programs have their advantages and drawbacks. It would help if you weighed both as you decide whether a layaway plan is right for you.
Benefits And Disadvantages Of Layaway
The most significant benefits of layaway:
- Breaking large transactions into smaller payments paid over time makes paying for purchases much easier
- No credit check
- No interest payments
The cons of layaway:
- Restrictive payment scheduling
- Service, restocking, cancellation, and other extra charges
- The store might refund you if you cancel your order or don’t complete the payment plan but won’t reimburse for program fees
Of course, you should also consider the other benefits and disadvantages of layaway. For example, layaway can eliminate the burden of taking on more debt. And, as Zachary Johnson told US News My Money, your credit isn’t hurt if you don’t make payments.
“It gives the consumer an opportunity to purchase an expensive product with payments on a weekly, biweekly or monthly time period,” said Johnson, an associate professor of decision sciences and marketing at Robert B. Willumstad School of Business at Adelphi University.
Although layaway programs are an excellent option for consumers with weak credit, they aren’t ideal if you’re already struggling financially, as the fees can add up fast. Generally, the higher the cost of your purchase, the less these charges matter, noted David Friedman, a law professor at Willamette University specializing in behavioral economics.
“Fees at most retailers for layaways can be fairly low – like $5 or $10,” Friedman told US News My Money. As a result, it would make “almost no financial sense to put a $100 toaster on layaway,” clarifying that an extra $5 or $10 correlates to a 5% to 10% markup on the product. However, if you put a larger appliance like a refrigerator on layaway, that same $5 to $10 fee amounts to less than 1% of the total price.
Be mindful that you will be out of the money you used to cover fees and other costs if you can’t finish the installment plan. Most layaway programs require a nonrefundable deposit when you sign up. And some charge cancellation fees when you close your order. These factors could make layaway less ideal for someone who is already struggling to make ends meet.
Retailers With Layaway Plans
Many stores offer layaway plans, including ones you may already plan to do your holiday shopping. Here are just a few.
Walmart’s 2020 holiday layaway program started on August 28 and will end on December 14 — though select locations have year-round programs for jewelry. Not everything qualifies for layaway, like food. However, you can use it for many other eligible products, such as furniture, sporting goods, toys, and electronics.
You can only use layaway for in-store purchases, and you must pay a $10 deposit or 10% of the total cost. Additionally, you must make a minimum purchase of $50 to use Walmart’s layaway program, though single products worth at least $10 can count toward that $50.
There is no set payment schedule while your merchandise is in layaway, so you can pay whenever you can before December 14.
Burlington And Baby Depot At Burlington
These retailers have year-round layaway programs, but it’s limited to a 30-day payment period for in-store purchases only. You must also make a 20% deposit or pay $10, depending on which amount is greater. You need to pay a nonrefundable $5 service charge, though Burlington might offer a $5 gift card to use in-store. There is a $10 cancellation fee in most locations if you close your order.
Gamestop has one of the most flexible layaway programs, with the biggest restriction being that it only applies to in-store purchases. You only pay a $25 deposit and can pay installments on your terms. Plus, there are no fees whatsoever.
Most Hallmark Gold Crown locations offer layaway plans beginning in July and ending in December. You can put an item on layaway for 90 days — in-store only — and pay a 20% deposit based on the purchase’s total cost.
- Williams, Geoff. “What to Consider Before Starting a Layaway Plan.” U.S. News & World Report, U.S. News & World Report, 16 Nov. 2020, money.usnews.com/money/personal-finance/spending/articles/layaway-programs-to-keep-on-your-radar.