If you’ve heard of layaway, you may think it’s an old-fashioned concept, but it’s still available and can help people afford an item without breaking out their credit card.
Here’s how layaway works in a nutshell: You buy an item over time via installment payments. When you’ve paid the full price, you get to take your purchase home. There may be fees involved as well as the possibility of forfeiting your payments if you can’t keep up with them, but this technique can be a helpful tool in some situations.
In this guide, you’ll learn more about layaway so you can decide if it’s right for you, including:
• What is layaway?
• How does layaway work?
• What are the pros and cons of layaway?
• Which stores offer layaway?
• What are alternatives to layaway?
What Is Layaway?
Layaway’s meaning is quite simple: You make a deposit, and a retailer holds your item (or lays it away) and collects the rest of the money over time. When paid in full, you collect your purchase.
Here’s a bit more detail on how layaway works.
• The customer chooses an item that’s eligible for layaway and makes whatever down payment the store requires to implement a layaway plan. (This amount varies based on the retailer, and may or may not include a service fee.)
• The customer then makes regular payments over time based on the retailer’s schedule. These payments may be made weekly, biweekly, or monthly. Online layaway plans let customers buy items according to scheduled deductions from their checking account.
• At the end of the layaway plan period, when the item has been paid for in full, the customer takes their purchase home or receives it in the mail.
One additional point about how layaway works: If the customer makes late payments or cancels the layaway plan entirely, they may be charged a restocking or cancellation fee — and may also forfeit some or all of the money they’ve put toward the purchase already.
💡 Quick Tip: Tired of paying pointless bank fees? When you open a bank account online you often avoid excess charges.
Why Use a Layaway Plan?
From the store’s perspective, layaway offers a low-risk way to make sales to those who might not otherwise be able to afford the purchase all at once.
Although the retailer might choose to charge a small fee to cover the item’s being tied up for the length of the layaway, if worse comes to worse and the buyer defaults, they can simply put the item back up on the shelf for sale.
From a buyer’s perspective, the attractiveness of layaway is even more obvious: It allows those who might not otherwise have the financial leverage to make large purchases affordably, over time.
Layaway is unique among financing options in that it often doesn’t involve interest, which means it can often be a more affordable choice than other types of credit or loans.
Pros and Cons of Layaway
Like any financial approach or product, there are both benefits and drawbacks to layaway plans.
Pros of Layaway
• The consumer doesn’t have to go into debt to make a purchase they would otherwise not be able to afford. Using layaway can help you avoid charging an item on your credit card, which typically incurs high interest rates (which makes it bad vs. good debt).
• Layaway plans don’t require a credit check — which also means that the consumer’s credit won’t be affected if they can’t pay the plan on time or in full.
• Fees associated with layaway plans are generally low and often don’t include interest.
Cons of Layaway
• Although they’re generally low, layaway plans do come with associated fees, such as service, restocking, and cancellation fees — and some of these may be non-refundable.
On the topic of fees, it’s worth noting that buying relatively inexpensive items on layaway can make the associated service fees proportionately costlier than they would be on higher-priced purchases.
• If the customer makes late payments or fails to pay in full, they might forfeit some or all of the money they’ve already put toward the purchase (though this varies by vendor, so check with the individual retailer you’re considering for full details).
• Repayment terms can be inflexible and it’s up to the vendor to set the repayment schedule.
• Layaway takes time and patience; it’s an example of delayed gratification. It may be less attractive to those who want or need to take home the purchase immediately rather than waiting until it’s been paid in full.
Get up to $250 towards your holiday shopping.
Open a SoFi Checking and Savings Account with direct deposit and get up to a $250 cash bonus. Plus, get up to 4.60% APY on your cash!
Stores That Offer Layaway Plans
Layaway was originally offered back in the 1930s as a result of the Great Depression, then began fading away when the history of credit cards reveals that using “plastic,” as it’s sometimes known, became more common later in the 20th century.
The history of recessions tells us they do happen over the years, and the popularity of layaway surged again during the Great Recession of 2007-2009.
These days, many retailers still offer both in-store and online layaway, either for the holidays or year-round.
In some cases, you may only be able to implement layaway on certain products — generally more expensive ones, like appliances and jewelry.
Layaway programs come and go, but retailers that currently offer layaway include the following. Note that a couple of these retailers offer layaway purchases via a service called Affirm; more on that below:
• Amazon
• Best Buy
• Big Lots
• Burlington Coat Factory
• Sears
• Target
• Walmart
If you’re unsure whether or not a retailer offers layaway, you can always ask!
4 Alternatives to Layaway
Here are some other ways customers can get their hands on items they might not be able to buy in a single purchase.
1. Similar Pay-over-time Plans
Some retailers, especially for online purchases, offer buy-now-pay-later or pay-over-time programs that are similar to layaway — rather than paying the full price today, you pay small installments over time.
On the plus side, customers can often receive their purchases before the payment plan has been completed.
However, some of these programs, like Affirm (a payment option available at checkout at many online retailers), can involve interest charges, particularly if borrowers are late on their payments or don’t complete the repayment plan in full.
2. Credit Cards
Credit cards are an obvious alternative to layaway plans — and using them, of course, means that the purchase can be taken home right away.
In fact, credit cards are sort of like the opposite of layaway: With layaway, you pay for an item and then receive it, whereas with credit cards, you receive it now and pay for it later.
(A quick vocabulary lesson: You may hear the term “buy now, pay later” vs. credit cards. If offered “buy now, pay later,” do your research to learn the details. These arrangements may be a kind of layaway. They often charge no interest, making them potentially a better move than using plastic.)
Of course, using credit cards almost always involves compounding interest charges, often close to or more than 20%, which is nothing to sneeze at.
Since it’s easy to carry a revolving balance while making minimum monthly payments, credit cards can quickly lead to a credit card debt spiral that can be difficult to climb out of.
💡 Quick Tip: When you feel the urge to buy something that isn’t in your budget, try the 30-day rule. Make a note of the item in your calendar for 30 days into the future. When the date rolls around, there’s a good chance the “gotta have it” feeling will have subsided.
3. Reconfiguring Your Budget
If being unable to make large purchases is more of a systemic problem than a one-time issue, some budget management may be in order.
Looking at how much money is coming in versus going out and then figuring out where cuts can be made and changing buying habits can be an important step. This can help you save up for the purchases you really need — and want — to make.
Shopping around to find the best deals can also help ensure that a purchase price is as low as possible, regardless of how you decide to finance it.
Recommended: Different Types of Budgets
4. Saving Up for a Purchase
Another option to layaway is to save up in advance until you have enough cash to go ahead and buy the item outright. Let’s say you want to buy a new laptop. You might automate your savings and have $25 transferred from checking on payday to your savings account (ideally, a high-interest one). Over time, the savings will build up and interest will accrue.
When you reach the amount needed, ta-da! You can go purchase your new laptop, without paying any interest or other fees related to buying it over time.
Recommended: Book Now, Pay Later Travel
Opening a Savings Account
If you’d like to start saving for a purchase, it can be wise to find a bank account that offers low or no fees and a solid interest rate to help your money grow faster.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
FAQ
How does a layaway plan work?
A layaway plan works by a customer paying installments over time until they have given the retailer the full price of the desired item. At that time, the buyer receives their item. A fee may be involved, but typically there are no interest charges.
Is it a good idea to buy things on layaway?
Layaway can be a good idea in some situations. It can help some customers purchase an otherwise out-of-reach item and avoid using high-interest credit cards and incurring debt. However, one must be able to wait to get the item, and the buyer could be charged fees. They might also forfeit payments if they can’t keep up with the installments that are due.
What is the difference between an installment plan and a layaway plan?
The terms layaway plan and installment plan are typically used interchangeably to refer to buying an item over time. You make regular payments that are a fraction of the full price until the item is paid up. Then, the purchase is yours.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
SOBK0723016
