When I was a child growing up on a military base with limited shopping options, layaway was a fact of life. Not only did our mother use layaway to buy our Christmas presents and school clothing, but we’d also use it to snap up the latest fashions before our sizes sold out when we ourselves turned into teenagers. Using layaway was an affordable way to spread out the cost of purchases without using credit cards.
For a while, it seemed like layaway was a thing of the past, but major retailers like Walmart have brought back the program during this past holiday. There is even an online version of it. While it seems like layaway is a can’t-miss proposition, here are a few things to be aware of before you make the decision.
1. Layaway usually isn’t usually free. Sometimes stores will offer free layaway as a promotion but it isn’t something you can always count on. For smaller items, the layaway fee can even be higher than what you’d pay in interest over the same period if you paid with a credit card, so be very careful if you are offered layaway. If you can, it makes more sense to save up the money in advance and pay in cash rather than pay a layaway fee.
2. You can miss out on great sales. If the item you want goes on sale during the layaway period, you can be stuck without a way to get the discount. Same with an item you just want to get a refund on. That’s because it’s hard to cancel an item put on layaway. It’s possible to cancel the layaway or get the item out and return it, but you’ll still be out of a cancellation fee and/or your layaway fee. You also have to now come up with the cash to buy the item that’s on sale.
3. You’ll have to shop early to take advantage of layaway. Many stores offer six to eight-week layaway plans, which means that you’ll have to shop well before you actually need the item. It’s fine on some stuff you are getting yourself, but gift shopping will become much harder. For example, you might have to shop before you know the “it” toy of the season and risk your children being disappointed if you are shopping for a Christmas gift.
4. If you can use credit wisely, you can take advantage of holiday promotions offered by stores to open a new account. Store credit cards offer discounts and those promotions are already a better deal for you than getting an item on layaway as long as you are able to pay the entire balance off before the interest kicks in. And if spend time looking up some of the better credit cards out there with their generous signup offer and cashback, you will be much better off financially. Paying with a credit card can also offer you additional warranties and protections as well as help you accumulate points.
5. Waiting in line to put items in layaway and redeem them can be time-consuming and stressful. This is especially true now when everyone is lining up to return their goods. Check to see if you have to go in-person to pay your layaway fees or if it’s possible to pay via phone or online. Try to avoid shopping and redeeming on weekends and go early in the morning on weekdays. It's usually a good idea to leave the kids at home, as waiting in a crowded line can bring on the whining and acting up in even the most well-behaved kids. You are also exposing everyone going to the store to COVID, so it’s a risk that’s not worth taking if you can avoid it.
6. It can be easy to go overboard and be too optimistic about what you can pay for later. While most plans will allow you to cancel your layaway or return the items after you redeem them, you will still be out some money for fees. Always stick to your budget, even when using layaway. If you do spend too much, don't fall into the trap of spending a lot of money to avoid being out of pocket for a little money. Circumstances change. Return the item if you can't afford it, even if you have to pay a fee to do so.
7. While it’s not likely to happen with a major retailer, you could be out of luck if the store you are buying from goes out of business while your items are in layaway. It’s also possible, although unlikely, for an unscrupulous retailer to take your down-payment and then go on the run. It’s best to stick with well-known, established businesses when using layaway. After all, it’s hard to imagine a retailer like Walmart going out of business anytime soon.
There is also a small chance that your items will be lost or stolen from the storage area. While you'll almost certainly get a refund, it means that you may have to buy it all over again and risk having the item being out of stock. And even if you can easily buy it again, you might not be able to get the same items for what you paid for.
8. If you fail to make payments on time you can lose the item and be out some or all of what you’ve paid already. Be sure to read the fine print and find out what happens if you are late or discontinue making payments. Keep all of your receipts and any paperwork that you sign as part of the layaway process. It’s possible to lose all of the money you’ve already put into the layaway if you don’t make all of the required payments, so it’s important that you read the fine print.
All that said, layaway does have some benefits. You can “reserve” items that are likely to sell out without going into credit card debt. You can take advantage of sales even if you don’t have the cash on hand and it gives you a bit of “wiggle room” for buyers remorse to set in (for many of us it’s much easier to return an item if it was never fully ours). In an ideal world, we’d all put aside cash in advance to pay for our purchases, but we wouldn’t hear about all these credit card horror stories if that was the case. For those on a tight budget or who are just starting out, layaway can be a relatively inexpensive way to be able to “buy” now and pay later.