8 Reasons Why Layaway Might Not Be the Best Choice

by Tracy · 1 comment

When I was a child growing up on a military base with limited shopping options, layaway was a fact of life. Not only did our mother use layaway to buy our Christmas presents and school clothing, once we were teenagers, we’d also use it to snap up the latest fashions before our sizes sold out. It was an affordable way to spread out the cost of purchases without using credit cards.

For awhile it seemed like layaway was a thing of the past, but now major retailers including Sears, Walmart and KMart have brought back the program. There is even an online version of it. While it seems like layaway is a can’t-miss proposition, here are a few things to be aware of before you make the decision.

1. Layaway usually isn’t usually free. Sometimes stores will offer free layaway as a promotion but it isn’t something that you can always count on. For smaller items, the layaway fee can be higher than what you’d pay in interest over the same period if you paid with a credit card. If you can, it makes more sense to save up the money in advance and pay in cash rather than pay a layaway fee.

2. You can miss out on great sales. If the item you want goes on sale during the layaway period, you can be stuck. It’s possible to cancel the layaway or get the item out and return it, but you’ll still be out a cancellation fee and/or your layaway fee.

3. You’ll have to shop early to take advantage of layaway. Many stores offer six to eight week layaway plans which means that you’ll have to shop before the holiday sales. If you are shopping for children, you might have to shop before you know the “it” toy of the season and risk your children being disappointed.

4. If you can use credit wisely, you can take advantage of holiday promotions offered by stores to open a new account. This can be quite a substantial discount – as long as you are able to pay the entire balance off before the interest kicks in. Paying with a credit card can also offer you additional warranties and protections as well as help you accumulate points.

5. Waiting in line to put items in layaway and redeem them can be time-consuming and stressful, especially during the busy holiday season. Check to see if you have to go in person to pay your layaway fees or if it’s possible to pay via phone or online. Try to avoid shopping and redeeming on weekends and go early in the morning on weekdays. It’s usually a good idea to leave the kids at home, as waiting in a crowded line can bring on the whining and acting up, even in well-behaved children.

6. It can be easy to go overboard and be too optimistic about what you can pay for later. While most plans will allow you to cancel your layaway or return the items after you redeem them, you will still be out some money for fees. Always stick to your budget, even when using layaway. If you do spend too much, don’t fall into the trap of spending a lot of money to avoid being out of pocket for a little money. Return it if you can’t afford it.

7. While it’s not likely to happen with a major retailer, if the store you are buying from goes out of business while your items are in layaway, you could be out of luck. It’s also possible, although unlikely, for an unscrupulous retailer to take your down-payment and then go on the run. It’s best to stick with well-known, established businesses when using layaway. There is also a small chance that your items will be lost or stolen from the storage area. While you’ll almost certainly get a refund, this means that you’ll have to shop all over again and might not be able to get the same items your were paying for.

8. If you fail to make payments on time you can lose the item and be out some or all of what you’ve paid already. Be sure to read the fine print and find out what happens if you are late or discontinue making payments. Keep all of your receipts and any paperwork that you sign as part of the layaway process.

All that said, layaway does have some benefits. You can “reserve” items that are likely to sell out without going into credit card debt. You can take advantage of sales even if you don’t have the cash on hand and it gives you a bit of “wiggle room” for buyers remorse to set in (for many of us it’s much easier to return an item if it was never fully ours). In an ideal world, we’d all put aside cash in advance to pay for our purchases, but for those on a tight budget or who are just starting out, layaway can be a relatively inexpensive way to be able to “buy” now and pay later.

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{ 1 comment… read it below or add one }

Karen, in North Carolina October 25, 2012 at 1:30 pm

We’re doing layaway this year to have a place to stash gifts and catch sales. My kid is too smart and will hunt while we’re getting mail or mowing…

Toys r us offers layaway for free. 20% down minimum and $10 to send your money back if you fail to pay/pickup by 12-16. No monthly payment requirement and sales apply. I have yet to attempt changes to this order.

Walmart also offers free layaway. 10% down minimum and $5 to process refund if you fail to pay/pickup. I have yet to put anything on layaway here, but I see Walmart from my home and they’re cheaper on some toys compared to toys r us. Walmart also has online layaway.

I agree that layaway can be tricky to use. However, if you keep a close eye and know/follow rules, it can be a great tool to catch sales and hide gifts from intelligent little monsters.

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