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What is Layaway?

Mary McMahon
By
Updated May 16, 2024
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Layaway is a type of agreement that can be made between a retailer and a consumer. The consumer pays a deposit to reserve an item, which is held until the consumer pays in full. The item itself is said to be “on layaway.” Typically, the customer has a set period of time in which he or she must pay in full for the item. If the customer fails to pay, the item is returned to stock for a small fee and the consumer's money is refunded.

It used to be quite common to purchase things on layaway, primarily because consumers were not readily offered lines of credit. When someone wanted to purchase a big ticket item, therefore, they would have had to complete the purchase in a layaway style if they could not afford the cost up front. The rise of credit cards and store credit has made this type of agreement somewhat more uncommon, but some companies do still offer it.

There are several advantages to purchasing something on layaway when the full price is not feasible up front. The first is that the item is held for the customer, so he or she knows that it will be available later. By buying items this way, consumers make a promise to buy the product, while the retailer agrees not to sell it to someone else in the meantime. The second is that a layaway plan typically has minimal or no fees, often making it less expensive than carrying a balance on a credit card.

In some regions of the world, layaway is called lay-by, or lay-away. The basic concept remains the same, however. Typically, the deposit represents a percentage of the total price, and a schedule of payments is usually worked out. If the consumer thinks that he or she will have difficulty making the payments, a new payment plan may be negotiable.

Not all stores offer layaway. It does require additional storage space, and this is not always possible in a small business. In addition, it also requires certain administrative duties, since someone needs to keep track of the payments and objects on layaway in the store. The rise in availability of lines of credit has also led stores to encourage the use of credit cards by their customers. Some stores also offer lines of credit through store credit cards, and they may provide rewards for customers who apply for and use store credit.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments

By anon349972 — On Oct 01, 2013

Plain and simple: if you can't afford it, you don't need it.

By anon161567 — On Mar 20, 2011

Layaway seems like a stupid concept for stupid people. People who use layaway can't save money for themselves. They need a structured payment system to help them manage their own money so they can buy things.

I'll bet the same people who use layaway also use regular mail to pay bills and actually go into the electric company, water company and cellphone stores to stand in line and pay their bills too.

By comfyshoes — On Nov 23, 2010

I remember when I was 18 and in college, I used layaway programs in order to buy my Christmas gifts because I was just starting to establish my credit.

I always looked at what stores offered layaway and did my shopping based on that. Layaway used to be very popular and I think that with the poor economy it might experience resurgence in many stores.

For now, Kmart and Sears are the mainstays in layaway plans. It does give these stores a competitive advantage among other retailers.

By Sunny27 — On Nov 23, 2010

Cupcake15-I know that it is a hassle for a store to have a layaway program because they not only have to have someone dedicated to making sure the customers follow the layaway policy, but they also have to store the excess merchandise that a customer may or may not pay for in full.

Some of this merchandise that is pulled off the floor might have been sold if it remained on the sales floor. These are among the many reasons why stores choose to opt out of such a program.

However, with the troubled economy some stores might begin a modified version of a layaway program in order to attract customers. K mart layaway is very effective which proves that stores with layaway are positively received by consumers.

By cupcake15 — On Nov 23, 2010

Cafe41-The Kmart layaway plan advertises their layaway program during the holidays because Target has no layaway and neither does Wal Mart.

Stores with layaway plans are Sears, Babies R’ Us, and Burlington Coat Factory. Burlington Coat Factory charges a $5 service fee and requires a 20% deposit.

Marshalls and TJ Maxx offer layaway in select stores. These are the most well know stores who offer layaway.

Online layaway is another option and is available through a company called ELayaway. This is a Florida based company that handles layaway programs for up to 700 online retailers including Best Buy.

They charge a 1.9% transaction fee which is collected on the first month. Most participants take from six to eight months to pay off the balance. The cancelation fee is $25 or 10% of the order which ever is greater.

By cafe41 — On Nov 23, 2010

Layaways are a great way to buy a series of things by saving up to buy them rather than using your credit card.

A layaway program is especially helpful during the Christmas holidays when gift giving is at an all time high.

By placing your merchandise on layaway you will be forced to budget which is something credit cards do no allow you to do because they are so easy to use.

In fact, most consumers spend more when they use a credit card which is why most retailers offer incentives for their customers to sign up for their credit card.

Even if you have established credit, participating in a layaway is still a good idea because even if you pay your bills at the end of the month and do not carry a credit card balance at lot of banks are now charging their best customers monthly fees of $1.5 or more, even if the balance is not carried over to the next month.

This makes the minimal layaway fee cost effective.

Mary McMahon

Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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