What to Consider Before Starting a Layaway Plan

When times are tough, layaway plans tend to thrive. This was the case during the Great Depression, when cost-conscious shoppers needed easier ways to make purchases. So they purchased items in installments, periodically giving the store money until they paid the total.

Layaway fell somewhat out of favor for a while, especially when credit cards came on the scene in the 1950s and 1960s, but the plans started to make a comeback during the Great Recession. In recent years, however, layaway plans have been losing ground to ” buy now, pay later” programs like Affirm, Afterpay, Klarna and QuadPay. For instance, earlier this year, Walmart killed off its layaway plan and replaced it with Affirm.

The advantage of the buy now, pay later model is, of course, that you get the merchandise immediately rather than in weeks or months. But the reason that many people are fans of layaway is that it doesn’t involve debt hanging over you. You essentially pay now and buy later.

If you’re contemplating using a layaway plan, here’s what you need to know, from how to get the most out of them to the stores that still offer layaway programs.

[READ: The Best Time to Buy Everything.]

What Is Layaway and How Does It Work?

Layaway plans are designed for shoppers who want to make purchases but may not have all of the cash on hand. Layaway is essentially an installment payment plan, where you pay for merchandise over a period of weeks or months. Instead of paying for an item after you receive it — as is often the case with credit cards and buy now, pay later plans — you make layaway payments before you receive your purchase.

Most people who want to buy something but lack the funds will wait until they have more cash and then make the purchase. So why use a layaway plan?

In some instances, you might be worried that the item won’t be around by the time you have enough money. If money is tight, you might be worried you won’t have the discipline to save specifically for those purchases. That’s where a layaway program can come in handy. If you pay a store $50 toward a $300 gift, you’ll likely make sure that you continue to make periodic payments and end up buying the item.

If you’re short on cash, but a store doesn’t have a layaway plan (Target, BestBuy and Amazon don’t offer these plans, for instance), you may want to see if it offers a buy now, pay later installment plan program.

With these payment plans, you receive the merchandise right away and pay in installments. Just as with a layaway plan, you generally don’t pay interest as long as you make payments on time. If you don’t, you will end up spending additional money in interest.

[READ: 10 Services That Allow You to Buy Now, Pay Later.]

The Pros and Cons of Layaway Programs

The main advantages of a layaway program:

— You don’t have to pay for the purchase all at once, and you’re able to spread out payments.

— No credit check required.

— No interest is charged.

The disadvantages of a layaway program:

— You pay on the layaway plan’s schedule, not yours.

— There are usually fees, such as service, restocking and cancellation fees.

— You may get a refund if you cancel or don’t make all the payments, but program fees, if there are any, are usually nonrefundable.

Of course, there are other pros and cons. For instance, a major upside of using a layaway program is not having to worry about going into deep debt.

Even better, if you have trouble making the payments, your credit won’t be affected, says Zachary Johnson, an associate professor of decision sciences and marketing at the Robert B. Willumstad School of Business at Adelphi University. Layaway can be a smart idea for consumers without strong credit, he says. “It gives the consumer an opportunity to purchase an expensive product with payments on a weekly, biweekly or monthly time period.”

Johnson says that most people seem to prefer the buy now, pay later programs that are replacing layaway, but he wonders if that’s a good thing in the long run.

“Consumer and psychological research tends to suggest that delayed gratification, consistent with layaway programs or simply saving for something special, tends to promote healthier and happier psychological outcomes for consumers,” Johnson says.

Not that everything about layaway is great. If you’re struggling with credit and money in general, a major drawback can be the fees associated with layaway programs. A rule of thumb: The more you pay for the merchandise, the less the fees matter, says David Friedman, a professor of law at Willamette University, who specializes in behavioral economics.

“Fees at most retailers for layaways can be fairly low — like $5 or $10,” Friedman says. For this reason, it would make “almost no financial sense to put a $100 toaster on layaway,” he says, explaining that an additional $5 or $10 means that toaster is really 5% to 10% more expensive. But if you use a layaway option to buy an appliance with a price of, say, $2,000, Friedman says, that $5 or $10 is less than 1% of the entire cost.

Keep in mind that if you can’t complete the layaway purchase, you will lose some money because of the associated fees. For instance, if you have to pay a nonrefundable fee at the outset, you won’t get that back. Plus, you may have to pay a cancellation fee and lose additional money. So while it may seem like a no-brainer to do a layaway program, if you’re living paycheck to paycheck, you still might be taking a financial risk.

[See: 35 Ways to Save Money.]

Stores With Layaway Plans

If you’re looking for a layaway program, here are some of the remaining stores that still offer it:

— Burlington and Baby Depot at Burlington.

— Kmart and Sears.

— Hallmark.

— Buckle

Burlington and Baby Depot at Burlington

Both stores offer layaway year-round, but the program itself is usually a 30-day, in-store layaway option. To participate, you must put down a 20% deposit or $10, whichever is greater. There is also a nonrefundable $5 service fee, though in some cases, promotions will negate that by giving you a $5 gift card for in-store purchases. If you can’t make all of your payments or you cancel the layaway order, there will be a $10 cancellation fee in most states (plus tax where applicable). Not all Burlington and Baby Depot stores offer layaway programs, but most do.

Kmart and Sears

Both stores, which are owned by the same company, offer layaway in-store options and online layaway programs. Of course, there are fewer Kmart and Sears stores these days, due to the retailers’ financial woes. Still, you can put items on layaway for eight weeks if you do online layaway and 12 weeks if you make a purchase in the store and the purchase is $300 or more. You’re required to make layaway payments every two weeks. You also have to make a down payment of $10, and cancellation fees are either $10 or $20, depending on whether you opted for an eight- or 12-week layaway program and if what you’re buying is $300 or more. (If it’s over $300, there would be a $20 cancellation fee.) There are also $5 and $10 service fees, depending on whether the layaway was for eight or 12 weeks. If you can’t pay for the entire purchase, you will get a refund minus the service and cancellation fees.

Hallmark

Many of Hallmark’s Gold Crown stores have layaway programs lasting from July to December. You can put a hold on an item for 90 days — inside the store and not online — and simply ask the store associate if you can put the item on layaway. You’ll need to pay a minimum of 20% of the total purchase and will be given a written copy of the terms and conditions (which vary by store). If you’re a Hallmark member receiving Crown Rewards points, you’ll get those on layaway purchases of in-stock items.

Buckle

This clothing retailer — which has well over 400 locations throughout the country — offers an in-store layaway service. You’ll put a minimum of 20% down, and the merchandise will stay in the store until you’ve paid it off in full. Buckle suggests paying every two weeks, but it’s up to you. They do ask that you have it all paid off within 60 days, or the merchandise goes back on the sales floor. If you cancel the layaway, you’ll get your money back, minus service fees or interest charges.

More from U.S. News

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What to Consider Before Starting a Layaway Plan originally appeared on usnews.com

Update 11/17/21: This story was published at an earlier date and has been updated with new information.

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