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.
You don’t see layaway programs a lot now, in part because cash registers and point of sale computer systems no longer have this functionality, according to John Talbott, director of the Center for Education and Research in Retail at the Indiana University Kelley School of Business.
In other words, if a store decides to do layaway, it becomes a laborious project because the payment system isn’t built for it.
But layaway still exists, and it does come in and out of popularity over the years. For example, layaway plans made a brief comeback during the Great Recession, which lasted from 2007 to 2009.
Part of the push behind layaway back then was thanks to Sears, Talbott says.
“Many people lost access to credit cards and because Sears had very dated computers and empty space in their stores, they were able to offer it and found it to be effective in attracting some customers,” Talbott says. “Sears was failing on all other fronts, but by God, we have layaway.”
Another reason layaway has fallen out of favor has to do with how shopping has changed over the years, according to Carlos Castelán, founder and managing director of The Navio Group, a retail consulting firm in Minneapolis.
“Increasingly, retailers have gone away from these layaway programs given the operational challenges that these programs entail,” Castelán says. “The backroom space has become more of a challenge as stores have tried to find more room to fulfill and hold curbside pickup orders or BOPIS orders.” (BOPIS stands for buy online, pickup in store.)
“These types of orders surge during the holiday season and they tend to take priority for the limited backroom space than layaway given the volume and time sensitivity of the orders,” Castelán says.
In recent years, layaway plans have been losing ground to “buy now, pay later” programs like Affirm, Afterpay, Klarna and Zip. For instance, last 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 make payments and once you get your merchandise, you can exhale — you owe nothing. Some shoppers love that, and others prefer getting their stuff now — and paying for it 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. There are not many layaway programs left, but there are some.
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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 and BestBuy 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.
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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 often some fees involved, 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 Adelphi University’s Robert B. Willumstad School of Business. 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.
But not 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, associate dean for strategic initiatives and 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.
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Stores With Layaway Plans
If you’re looking for a layaway program, here are some of the remaining stores that still offer it:
— Amazon.
— Burlington and Baby Depot at Burlington.
— Gabe’s.
— Hallmark.
— Buckle.
Amazon
Yes, even in this age of buy now, pay later, Amazon has a layaway program. It makes sense, since they have a little more space than a traditional store. Amazon’s layaway program isn’t available in Washington, D.C., or Connecticut, Illinois, Maryland, Ohio and Pennsylvania, or outside of the United States. And not every item will be eligible. If one of your orders is eligible, you can add it to your shopping cart and can select “layaway,” locking in the price. You will pay 20% of the price upfront. and then make four additional payments over eight weeks. If you pay off early, you’ll get the item delivered earlier. If you cancel, you’ll get a full refund.
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. If you purchase anything between Nov. 19, 2022, and Dec. 11, 2022, it will be held for less than 30 days. To participate, you must put down a 20% deposit or $10, whichever is greater. There is also a nonrefundable $5 service fee; if you’re a loyalty member, you’ll get a $5 bonus for completed layaways, which pretty much negates that service fee. 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 locations offer layaway programs, but most do.
Gabe’s
This department store with over 120 locations throughout much of the Midwest and South has a layaway program. Here’s how it works: You have to be at least 18 years old to participate and a rewards member. Each customer can do one layaway, and it can’t be food or anything in clearance. You have to spend at least $50 and no more than $500, and there is a $10 cancellation fee. You can earn coupons from what you spend, but the coupons can’t be applied to your layaway. You’ll make 20% of your payment, every two weeks, and it needs to be finished by Dec. 20. There is a $10 deposit as well as a $10 set-up fee.
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. If it isn’t, the merchandise goes back on the sales floor. If you cancel the layaway, you’ll get your money back, and there is no service or cancellation fee.
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What Is Layaway? originally appeared on usnews.com
Update 11/23/22: This story was published at an earlier date and has been updated with new information.
