Layaway: An Alternative to High-Interest Debt

By Mike Peterson
In November 23, 2012

If you’re like most people, you’re probably looking for ways to get the most bang for your holiday buck – without racking up piles of new, high-interest credit card debt.  Black Friday is one way to snag some great prices, but those post-Thanksgiving “doorbusters” and “early bird” deals only apply to a few very specific items.  Saving up to pay cash is another smart strategy, financially speaking – but what happens if you save up the money, only to find that the year’s hottest toy is sold out in every store?


Store layaway programs fell out of favor in the last decade or so – but in recent years, they’ve been popping up again, offering holiday shoppers a new way to sidestep credit cards and still get the hot items on their holiday shopping lists.


Maybe you’ve never used layaway before – or maybe it’s just been a few years.  Whatever the case, I thought I’d give you a quick rundown of layaway: what it is, how it works, and the pros and cons.


What is Layaway?


Layway is what many stores did before they offered their own in-house credit cards. Basically, you shop for items, take them to the cash register or customer service desk, and pay a small service fee and a down payment.  Your purchases are bundled and held at the store and you make weekly or bi-weekly payments on them, usually over a period of 8 to 12 weeks.  When you’ve paid your full balance, the items are yours to take home.


Layaway: The Pros


There are a lot of great benefits to using layaway for your holiday shopping:

  • You can pay over time.  Of course, it would be nice to save up the cash to pay for every item on your holiday shopping list – but waiting to save money can sometimes mean postponing your shopping and possibly missing out on the year’s must-have toys and gadgets.  With layaway, you’re guaranteed to get the things you want, provided you pay them off by the deadline on your layaway plan.


  • Fees are usually pretty low.  Although layaway plans vary from store to store, most of them charge a small fee – usually around $5 or $10 – for putting items on layaway.  Sure, it’s $5 or $10 more than you’d pay if you waited and saved up – but it’s way less than paying 15% interest for putting those items on your credit card.  Plus, putting items on layaway means you don’t have to drive from store to store and fight the crowds in search of gifts.


  • You can walk away if you have to.  Let’s say you’ve got a few hundred dollars’ worth of merchandise on layaway at your local big-box store – and then, just before you make your final payment, you lose your job.  Or your home’s heater goes out.  Or your car breaks down and requires pricy repairs.  With layaway, you can basically walk away at any time.   You might pay a small cancellation fee, but that’s it.  You get most of your money back and your layaway items go back on the shelf.  End of story.  Now let’s say you bought a few hundred dollars’ worth of merchandise on your credit card.  If financial disaster strikes, you’re stuck paying – with interest.  The items are already yours.  You can’t walk away.


With layaway, you only get the items once they’re 100% paid for – which means that there’s no worry about coming up with money for payments later.  


Layaway: The Cons


Layaway can be a great, flexible option for people who want more flexibility and lower risk than a credit card can offer.  But there are some potentially not-so-great things about layaway plans, too:


  • You miss out on special promotions and sale prices.  Most layaway plans exclude Black Friday doorbuster deals, clearance sales, and limited-quantity items.  While this might not be a dealbreaker, it’s something to consider as you plan your holiday shopping.


  • It’s easy to justify overspending.  While layaway offers some distinct advantages (no interest, lower risk) over credit cards, there’s still the danger of falling into the “buy now, pay later” trap.  Don’t use the appeal of low, bi-weekly payments to justify buying more than you normally would.  Also, some – but not all – stores require you to spend a certain dollar amount to qualify for layaway.  If you find that you’re just throwing random things into your cart to meet a minimum purchase requirement, layaway might not be worth it.


  • There’s a finite payoff time.  Unlike credit cards, which allow you to more or less make payments indefinitely (provided you at least make your minimum monthly payments), layaway plans typically require you to pay your full balance off in a certain amount of time – 8 weeks, 12 weeks, 45 days, etc.  Depending on how you look at this one, there’s a case to be made for listing it in the “pro” category, too.  After all, you’re not getting into debt.  On the other hand, though, if you’re not able to pay your balance off within the set timeframe, your items will go back to the shelf and you may get charged a small cancellation fee.  Again, this isn’t catastrophic – but it’s something to consider if you’re not sure of your current financial situation.


So, is layaway a good idea?  That depends.  If you want to avoid credit card debt and make sure you get this year’s hottest toys, it might be.  If you want to get the lowest prices and don’t care as much about specific brands or items, you might be better off saving up the cash.


Interested in layaway?  Check out your favorite stores for more information. Or, check out this handy cheat sheet for a quick rundown of some popular holiday shopping destinations:

Happy holiday shopping!!

Mike is the author of “Reality Millionaire: Proven Tips to Retire Rich” and he has been published in a variety of local and national publications including Entrepreneur Magazine, Deseret Morning News, LDS Living Magazine, and Physicians Money Digest. He holds a B.S. in business administration from the University of Phoenix.

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