What Are Layaways and How Do They Work?

Defining Layaway

Layaway is a purchasing method where consumers reserve an item by making a series of payments over time. The retailer holds the merchandise until the full purchase price is paid. This allows individuals to acquire products without needing immediate full payment or incurring debt through credit.

Layaway enables consumers, especially those with limited income or without access to traditional credit, to budget for larger purchases. It functions as a savings plan, ensuring the consumer commits to buying a specific item. Unlike credit purchases, where items are taken home immediately and paid for later, layaway requires complete payment before the customer receives the merchandise. This method helps consumers avoid interest charges often associated with credit cards. It also carries little risk for the seller, as the item remains in their possession until fully paid.

How Layaway Plans Work

A layaway plan begins with the customer selecting an eligible item and making an initial deposit. This down payment is often a percentage of the total price, commonly 10% to 20%, though some retailers might require a set dollar amount. This payment secures the item, which the store then sets aside.

Following the deposit, a payment schedule is established, outlining the frequency and amount of subsequent payments. These payments can be structured weekly, bi-weekly, or monthly, depending on the retailer’s policy and the plan’s duration. Durations vary from a few weeks to several months, or longer for higher-value items. Adhering to this schedule is important to ensure the item remains reserved.

The purchased item remains with the retailer until all payments are completed. Once full payment is processed, the customer can pick up their merchandise. Some online programs may allow for pickup at a distribution center or direct shipment.

If a customer cannot complete payments, cancellation policies apply. Retailers often charge a cancellation fee, which can range from $5 to $25 or a percentage of the item’s value. Some policies may also include a restocking fee, particularly if the item was held for an extended period. Payments made prior to cancellation might be refunded in full, returned minus fees, issued as store credit, or in some cases, forfeited entirely.

Current Availability of Layaway

Traditional layaway is less common than in previous decades but is still offered by some retailers, especially during the holiday season. Certain types of stores, such as department stores, jewelry stores, and discount retailers, are more likely to provide it. For example, Burlington offers year-round layaway, while Walmart has historically offered seasonal layaway.

Items typically available for layaway include higher-priced goods where consumers might need more time to pay, like electronics, large appliances, jewelry, toys, and apparel. Some retailers may have exclusions, such as food items or specific home goods. The decline in widespread availability is partly due to administrative costs for retailers and the rise of “Buy Now, Pay Later” (BNPL) services. Many major retailers have transitioned to partnerships with BNPL providers.