What Is Layaway?

What Is Layaway?

Let me explain layaway to you directly: it's a way to buy merchandise where you make a down payment on an item, and the store holds it for you while you pay the rest in installments. You get to take it home only when you've paid in full.

With a layaway plan, you're guaranteed to get the item you've chosen once it's fully paid for.

Key Takeaways

You should know that 'layaway' means putting a deposit on merchandise and paying the balance over time. You lay away the purchase for later pickup when the balance is paid in full. The store keeps the item until it's paid for. These programs target shoppers with limited income who can't afford lump-sum payments. They started in the Great Depression of the 1930s and faded in the 1980s as credit cards became popular.

Understanding Layaway

If you're someone with limited disposable income and can't handle big one-time purchases, layaway works well for you. There might be a fee involved because the seller has to store the item until you finish paying.

Sellers can offer layaway even to those with bad credit since there's low risk—if you don't complete the payments, they just put the item back on the shelf. Your money might be refunded fully, minus a fee, or as store credit.

Retailers benefit too, as it lets them sell to lower-income customers like a savings plan. Once you've committed, you won't spend that money elsewhere.

Online Layaway

You can find online layaway programs where you buy items through scheduled deductions from your checking account. This cuts down on storage and bookkeeping costs for everyone. The items stay at the distribution center during the layaway period, not taking up retail space.

Important Notes on Layaway

Retailers often limit layaway to expensive items like jewelry and electronics. Smaller things like toys usually aren't available for layaway.

Layaway vs. Credit Cards

Both layaway and credit cards let you buy what you can't pay for upfront, with installment payments, late fees, and default penalties.

The big difference is you take the item home right away with a credit card, but with layaway, only after full payment. Layaway needs a deposit; credit cards don't. You usually won't pay interest on layaway, but credit cards can add up with interest, leading to debt.

Defaulting on layaway won't hurt your credit score, unlike credit cards. You don't need good credit for layaway, but you do for credit cards.

If you can pay off your credit card balance next month without interest, it's better—it builds credit, offers rewards, and gives immediate possession. But if you can't, layaway avoids high-interest debt.

The History of Layaway Plans

Layaway started during the Great Depression in the 1930s when people were struggling financially. It stayed popular until the 1980s, when credit cards made it less necessary.

Walmart stopped layaway after 44 years in 2006 due to declining demand and costs, per NPR. They brought it back in 2011 amid the Great Recession and tighter credit, but only for holidays. It ended again in 2021, replaced by Affirm, a buy now pay later program.

With Affirm, you borrow to buy and take items home immediately, repaying over 3 to 24 months. It covers electronics, games, tools, toys, instruments, jewelry, home improvement, and apparel. Creating an account doesn't affect credit, but purchases might. No fees, unlike credit cards, but it's similar in some ways.

What Stores Offer Layaway?

As of 2024, some companies still have layaway with varying terms. Let me walk you through them.

Army & Air Force Exchange

This military retailer has a promotion from Sept. 6 through Dec. 24, 2024, waiving the usual $3 fee if paid and picked up by Dec. 24. Electronics like notebooks and smartwatches must be done by Dec. 13. You need a 15% down payment, and there's a $5 cancellation fee after full payment.

Baby Depot and Burlington Coat Factory

Owned by the same company, they offer the same plan, but not at every store—check online. It's for 30 days with a $10 or 20% down payment (whichever is greater) and a $5 nonrefundable fee. Pay in-store by cash, check, or card. $10 cancellation fee. Excludes food, wall art, rugs, lamps, and furniture.

Big Lots

They have two programs called layaway, though not traditional. Price Hold for furniture holds the price until restocked or paid; notify them two weeks before payoff. Only at furniture-selling stores—check the locator.

Progressive Leasing is 12 months to ownership (3 in California), with early payoff option. No credit needed, up to $3,000, payments weekly, biweekly, or monthly. Covers furniture and seasonal items.

Hallmark Gold Crown

Some stores offer layaway July through December, up to 90 days, with 20% down. Policies vary, so ask about fees, cancellation, and interest.

Kmart and Sears

Through eLayaway, owned by Transformco. Sears: 8 or 12 weeks, down payment $20/$35 or 20%, four installments, fees $5/$10, cancellation $15/$25.

Kmart: $15 or 10% down (sometimes $10 special), 8 or 12 weeks, fees $5/$10, payments every two weeks.

Marshalls

Via eLayaway, not all locations. 10% down, $5 fee, installments start within 30 days after quick approval.

What Is a Layaway Plan?

It's where you deposit on an item to hold it, paying the balance later for pickup. Often no interest, available to anyone, even bad credit. Doesn't affect your score, unlike BNPL or cards.

What Are the Origins of Layaway?

It began post-Great Depression due to hardships. Popular until 1980s, supplanted by cards, revived after 2008 recession, now declining with BNPL.

Is a Layaway Plan Better Than Using a Credit Card?

It depends. Cards give immediate ownership, no down payment, build credit, offer rewards. But they have high interest if not paid off. Layaway has no interest, no credit damage on default, no credit needed. Use cards if you pay monthly; otherwise, layaway.

The Bottom Line

Layaway has been around since the 1930s but got scarcer after 1980 with cards. It's still useful when money's tight and lump sums aren't possible. Fewer options now, but worth checking.