The rewards and risks of buying on layaway (2023)

There’s no shortage of Americans who, in just such a circumstance, will open up a wallet or purse and reach for the credit card. But what if you’ve got no plastic to your name?

You fall in love with a piece of merchandise in the store: What a perfect gift for you, your family, your boss. But how can you hope to buy it when you don’t have enough cash in the bank to pay for the item and cover your bills?

There’s no shortage of Americans who, in just such a circumstance, will open up a wallet or purse and reach for the credit card. But what if you’ve got no plastic to your name?

You might be able to put the item “on layaway.”

The layaway process involves a retailer setting aside an item for you and letting you pay for it over a set period of time. When you put something on layaway, the clock starts. If you don’t pay the full balance before the end of the layaway plan, you may lose the item and be charged a fee. When you’ve made your last payment, you’ll receive your merch.


Why use layaway?

Layaway programs give you time to pay for an item without digging yourself into credit card debt. They may be attractive to people who have a limited amount of disposable income, don’t have access to a line of credit, have trouble qualifying for a credit card or want to avoid a credit check when financing a purchase.

Some retailers offer both in-store and online layaway programs, but many only allow one or the other. For example, Walmart only offers in-store layaway during the holiday season, but Sears will let you buy on layaway online and in brick-and-mortar stores, year-round.

Many layaway programs also allow you to lock in a price. So if the item you crave is on sale, you’ll ultimately get it for that sale price even if prices rise. Alas, this benefit becomes a drawback if the price drops significantly by the time you finish making payments.

Layaway programs aren’t free. In addition to the cost of the item, you may pay program fees to participate in the program. Such fees vary from retailer to retailer but generally fall between $3 and $15 and may be based on the length of your layaway. For example, Sears charges a $5 fee to hold items for eight weeks and a $10 fee for a 12-week layaway.

Plans can cover a time period from a few weeks to a few months, depending on the retailer and terms you agree to, so the fee compensates the seller for the time and labor it takes to set aside and stock your item on layaway. If you change your mind and decide not to purchase the item, you may be charged cancellation and restocking fees of about $10. Because fees vary by retailer, you definitely want to read the fine print before you agree to a layaway program and understand exactly what you’re getting into.

(Video) Buy now, pay later: Retail giant Walmart phases out layaway program

Sometimes, all of the costs and fees associated with the program will render a layaway item more expensive than if you’d charged the purchase to a credit card and paid it off, with interest, in the same time period. Of course, that’s only a valid comparison if you have the either/or choice.

If you’re considering using layaway this holiday season, here are some things you need to know so you can keep the costs to a minimum.
What to watch out for:

Opening fees: This is a fee commonly assessed to participate in the layaway program. It may be called a holding fee or service fee. Burlington Coat Factory, for example, charges a $5 service fee to put items on layaway. (At the same time, though, it is touting a promotion: You get a $5 promotional card when you complete your layaway by Christmas Eve.)

Item restrictions: There may be restrictions on which items you are allowed to put on layaway. Marshalls, for instance, clearly states which items are not allowed. At the discount retailer, “jewelry, items that have been marked down, food items and furniture cannot be placed on layaway.” On the Sears website, the policy is that only items identified as “available for layaway” are eligible for the program.

Down payments: You generally won’t be allowed to put an item on layaway without offering up some cash so the retailer knows you’re serious. A down payment is a common element. Toys R Us, for example, requires you put down at least 10 percent of the total cost of your purchase. During promotional periods, the toy store will waive its $5 service fee.

Important dates: Beware of important dates and deadlines. The retailer may require that you repay the full amount in a certain number of weeks or months. Or it may need your final payment a few weeks before the major winter holidays, so you shouldn't wait until the last minute.

(Video) Store Cards, Layaway Programs, and Cash vs. Credit: What Retailers and Consumers Need to Know

For example, at Walmart, you have to make a final payment and pick up your items by Dec. 11, or the account will be canceled and you may be charged a cancellation fee.

Depending on the retailer, you may also be required to make periodic payments online, by mail or in a store, so you should make a note of those dates. If you miss a scheduled payment, you may break your layaway contract. For example, Sears’ eight-week layaway program requires you make a payment every two weeks, and if you miss the payment, you have 14 days until your layaway is canceled and face a cancellation fee.

Minimum purchase amounts: The store might not keep your item or items if the total cost of the items you’re reserving on layaway doesn’t meet a certain mark. If you want to put a bundle of items on layaway at Walmart, for example, the each item must be at least $10 and the entire purchase must be $50 or more.

Price changes: Don’t assume the price you see the day you place your item on layaway will stay the same. These days most layaway programs are managed electronically, so if the item’s price rises from its sale price during your layaway period the system may automatically update your contract to reflect the new price. Unfortunately, the system may not automatically update the price if the item goes on sale.

Keep your original receipt and monitor any price changes on your account carefully on the retailer’s website or when you stop by the store to make a payment. If the price changes, ask if the retailer will honor the price you’d agreed to pay originally or a lower sale price if the item has been marked down. Some store programs will honor the price the item was the day you placed it on layaway or price match to the sale price, but others may not.

(Video) Pay now or layaway?

Cancellation and restocking fees: If you pay to put something on layaway, make sure you really, really want the item, because if you cancel or cannot make all the payments by the plan’s due date, you may have to pay fees. Many retailers like Walmart, KMart, Burlington Coat Factory and Toys R Us, for example, charge a fee if you decide to cancel your layaway program and restock the items. All of the aforementioned retailers charge customers anywhere from $5 to $25 to cancel layaways. Some, like clothing retailer Rainbow, call the cancellation charge a restocking fee.

Why choosing a layaway program can be worse than using credit

To demonstrate why layaway is a more expensive borrowing option than using a credit card, we give the following example:

Benny pays a $10 service fee to put a $100 item on layaway for 12 weeks (roughly three months) at his favorite department store. By the time he picks up the item in the store at the end of Week 12, he will have spent $110.

If he had put that $100 item on a credit card with a 14.87 percent APR (the current average) and paid off the balance within three months, he would have spent about $102.48.

(Video) A new way to layaway

However, if you don’t have the option of using a credit card to finance a purchase, layaway can be cheaper than other short-term lending options like a payday loan or an overdraft on a checking account. No matter how you choose to pay for holiday gifts, pay close attention to all the costs you may incur, whether that’s interest or a variety of service fees.

MagnifyMoney is a price comparison and financial education website, founded by former bankers who use their knowledge of how the system works to help you save money.


What are the benefits of layaway? ›

The Benefits of Layaway
  • 0% Interest. People like this option because they do not incur additional costs. ...
  • Payment Plan. Paying through installments is another alternative to credit cards. ...
  • Credit History. A layaway plan eliminates the need to look into a customer's credit history. ...
  • Product Availability.
Mar 17, 2021

Do you get your money back if you cancel layaway? ›

Cancellation and Refund Policies

Retailers use a number of different refund policies for layaway transactions. Some give full or partial cash refunds if layaways are not completed. Others give credit toward future purchases. State law may dictate what refund policy you must follow.

Does layaway affect credit score? ›

Layaway plans have zero impact on your credit scores. The store does not check your credit report to see if you qualify, so a hard inquiry won't be posted on your credit report, and a layaway agreement won't show up as positive payment history.

What are three payment risks? ›

The Bank for International Settlements' Committee on Payment and Settlement Systems identifies five major categories of risk associated with payment transactions: fraud, operational, legal, settlement, and systemic.

What are the risks involved in payment? ›

Payment Systems face various risks like credit, liquidity, legal, operational and settlement risks. However, systemic risks by far outweigh other types of risks.

What are two advantages to the customer of utilizing layaway? ›

There are several benefits to using a layaway plan, including the ability to avoid incurring interest on credit card accounts and managing purchases without creating undue stress on the household budget.

Does layaway have a fee? ›

Although layaway plans are usually interest-free, most retailers charge some or all of these fees: Service fee: In addition to a down payment, most stores will charge a service fee (usually between $5 and $15) to cover the cost of storing your item and processing multiple payments.

Does layaway cost more? ›

You might be paying a higher price.

If you put items on layaway now so that they'll be paid off by the holidays, you'll likely be buying them at full price.

Why did Walmart stop layaway? ›

Walmart had announced in 2006 that it was doing away with layaway, citing declining use at the time. The company offered other options at the time like its credit card.

Why did they stop layaway? ›

Layaway became common during the Great Depression of the 1930s. It was widely withdrawn during the 1980s, as the ubiquity of credit cards decreased its utility.

Can you pay off layaway early? ›

No, all Layaway orders must be paid in full within the 8-week Layaway period.

What are layaway rules? ›

With a layaway plan, a consumer makes a deposit on the sale price of a product, followed by subsequent installment payments and, in return, the store agrees to hold the product in reserve. Upon final payment, the store hands the product over to the consumer.

What will not raise your credit score? ›

Accounts that are incorrectly listed as having late or delinquent payments. The same debt listed at least twice. Credit limits for accounts that aren't accurately reported.

What are the four major risks? ›

The main four types of risk are:
  • strategic risk - eg a competitor coming on to the market.
  • compliance and regulatory risk - eg introduction of new rules or legislation.
  • financial risk - eg interest rate rise on your business loan or a non-paying customer.
  • operational risk - eg the breakdown or theft of key equipment.

What are high risk payments? ›

Payment processors label a merchant high-risk if they've identified a high likelihood of fraud, chargebacks, returns, long window delivery periods (which can lead to complications and chargebacks) or large transactions. High-risk merchant accounts pay higher processing fees to account for this risk.

Which method of payment is the least risky? ›

By and large, credit cards are easily the most secure and safe payment method to use when you shop online. Credit cards use online security features like encryption and fraud monitoring to keep your accounts and personal information safe.

What are 5 financial risks? ›

Types of Financial Risk
  • Systematic Risk. It is a financial risk that cannot be predicted or avoided due to several factors. ...
  • Non-systematic risk. ...
  • Income Risk. ...
  • Expenditure Risk. ...
  • Asset / Investment Risk. ...
  • Credit / Debt Risk. ...
  • Short-Term Financial Risk. ...
  • Long-Term Financial Risk.
Aug 23, 2022

What are the risks of credit risk? ›

Credit risk is the possibility of a loss resulting from a borrower's failure to repay a loan or meet contractual obligations. Traditionally, it refers to the risk that a lender may not receive the owed principal and interest, which results in an interruption of cash flows and increased costs for collection.

What are the advantages of buying something in installments? ›

It allows you to reach your purchase cost in a controllable period of time. Without a doubt, installments allow you to buy things that you would otherwise have to give away if you paid in full. Depending on your cash flow timeframe, you can choose to pay in installments and your payment range is up to 30 months.

What are the advantages of payment methods? ›

It simplifies the payment process, increases security and convenience, is carried out in real-time, is very convenient for everyone, provides a more up-to-date image of the business, crosses borders, multiplies the possibilities of budgets being converted into sales, digitises any business quickly, is intuitive and ...

What are some of the pros and cons to mobile payment methods? ›

Mobile payments can be convenient, fast and secure. They can, however, be expensive and still vulnerable to issues with technology. In particular, if there are any issues with the host phone, mobile payments will be unable to work at all.

Will Target have layaway 2022? ›

Target doesn't offer layaway on or in Target stores. Target also doesn't hold paid purchases in store.

Is Walmart bringing back layaway 2022? ›

Unfortunately, Walmart layaway 2022 is not a thing anymore. While the Walmart layaway program used to be popular with holiday shoppers for many years, that program is officially gone.

What is replacing layaway at Walmart? ›

Walmart last year scrapped its layaway program and replaced it with a buy now, pay later financing option.

What is layaway called now? ›

Ahead of the 2021 shopping season, Walmart removed its layaway program, one of the last vestiges of this service from a major retailer, and replaced it with the “buy now, pay later” service Affirm.

Is layaway a debt? ›

Stores that offer layaway plans may charge a fee to use them, though you typically won't pay any interest since this is not a loan. 6 That's because shoppers aren't borrowing money to use layaway. Instead, they make payments on items the store is holding for them.

Do you pay interest when using a layaway plans? ›

No interest: Purchases made through a layaway plan typically aren't subject to interest. No credit check: A credit check usually isn't required with layaway. This can be helpful for those working toward improving their credit score.

Why is my credit score going down if I pay everything on time? ›

you have a high credit utilization ratio

you might have paid your bills on time, but you also need to check the balance you carry on each credit card. if you have a high credit utilization ratio, it can cause a drop in your credit score. you should check your credit limit usage on both an overall and per-card basis.

Should I pay off my credit card in full or leave a small balance? ›

It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.

How can I raise my credit score to 800? ›

4 key factors of an excellent credit score
  1. On-time payments. The best way to get your credit score over 800 comes down to paying your bills on time every month, even if it is making the minimum payment due. ...
  2. Amounts owed. ...
  3. Credit history. ...
  4. Types of accounts and credit activity.
Jan 19, 2023

What are the main security risks when handling payments? ›

Top 5 Security Risks in Credit Card Payments (And How to Conquer Them)
  • Employee Error. You know how important it is to invest in a secure network. ...
  • Improperly Stored Credit Card Information. ...
  • Credit Card Fraud. ...
  • Outdated System Software. ...
  • POS Skimming.

What is the biggest security risk? ›

1) Phishing Attacks

The biggest, most damaging and most widespread threat facing small businesses is phishing attacks. Phishing accounts for 90% of all breaches that organizations face, they've grown 65% over the last year, and they account for over $12 billion in business losses.

What are some of the most common security risks? ›

7 Types of Cyber Security Threats
  • Malware. Malware is malicious software such as spyware, ransomware, viruses and worms. ...
  • Emotet. ...
  • Denial of Service. ...
  • Man in the Middle. ...
  • Phishing. ...
  • SQL Injection. ...
  • Password Attacks. ...
  • The Internet of Things.

Do people still use layaway? ›

However, it had a resurgence around 2008, when the economic recession made people a little more cautious with their credit cards. Now, you can find layaway at a number of major retailers — particularly around the holidays. But layaway isn't always the right financing option for everyone.


1. Walmart investigating layaway payment
(WPTV News - FL Palm Beaches and Treasure Coast)
2. Walmart replaced Layaway with Affirm and PEOPLE ARE MAD... Don't finance your holiday shopping
(The Millionaire Morning Show w/ Anton Daniels)
3. 10 CHEAP FLIGHT HACKS That Will Save You Money!
(The Deal Guy)
4. 10 Shopping SECRETS TJ Maxx Doesn't Want You To Know!
(The Deal Guy)
5. 'Buy now, Pay later' can come with benefits and risks | Dollars and Sense
6. How to find products on Amazon in order to use their monthly payment option
(Victoria Jean)
Top Articles
Latest Posts
Article information

Author: Prof. Nancy Dach

Last Updated: 01/25/2023

Views: 5259

Rating: 4.7 / 5 (57 voted)

Reviews: 80% of readers found this page helpful

Author information

Name: Prof. Nancy Dach

Birthday: 1993-08-23

Address: 569 Waelchi Ports, South Blainebury, LA 11589

Phone: +9958996486049

Job: Sales Manager

Hobby: Web surfing, Scuba diving, Mountaineering, Writing, Sailing, Dance, Blacksmithing

Introduction: My name is Prof. Nancy Dach, I am a lively, joyous, courageous, lovely, tender, charming, open person who loves writing and wants to share my knowledge and understanding with you.