The Lowdown On Layaway

By Julie Rains. Last updated 18 November 2008. 8 comments

Layaway never completely disappeared from the retail landscape but it’s become more prominent with promotions by some national chains and locally-owned shops. Instead of paying for merchandise in full with paper (cash, check) or plastic (credit card, debit card), you enter into an agreement to pay over time, taking possession of an item after you have finished paying. From a financial-discipline and delayed-gratification perspective, layaway is a great concept. Here are questions to ask to make sure a layaway program makes sense for you.

The big question for me is: 

  • Does the store stock this item on a regular basis and if I wait until I have saved the money to pay for it, will it still be available? (If the merchandise would still be around or if I could find a better deal later, I might save my money and buy later).

You might ask the store or online layaway provider:

  • If the item goes on sale before I finish paying for it, will I pay the full retail price or the discounted sale price? 
  • If I change my mind about the purchase, will all my money be refunded or will I receive a store credit?
  • Are there fees or other charges associated with the layaway program?
  • How often do I need to make payments?
  • Will I lose my deposit and money I’ve paid toward the item if I miss a payment?
  • Will my item be taken out of inventory and set aside?
  • Where will my item be stored?

Several years ago, I bought a suit for work by using layaway with a local shop, making payments of irregular amounts when I could (usually every payday); when the balance was paid in full, I took the suit home. Having had problems finding professional clothing in my size (when I was living in a small town in the days before online shopping), I wanted to go ahead and claim the clothes, then pay. Many layaway programs now require paying the full amount within 90 days or less, rather than making payments in an indeterminate time frame.

The gotta-have-it-now approach to shopping and (prior) access to credit are typically mentioned as the reasons for the decline in layaway’s popularity. But, for the retailer, these programs can be time-consuming to administer, require valuable sales floor or backroom space for storage, and reduce the amount of cash available to invest in new inventory, all of which impact profitability. "Same as cash" programs were more attractive from a merchant's perspective and even for some consumers (warning: if you miss the payment deadline, interest is often calculated on the entire purchase amount and not the outstanding balance). Slower sales activity, tighter credit, and consumer preference may have led to a new interest in the pay-first, take-it-home-later programs.

Still, consider if the retailer has the policy, processes, and systems in place to make sure the layaway deal works for you. Get the policy in writing, document payments, and follow the program guidelines. This guide from the FTC gives consumers an idea of what a well-managed layaway program should look like. Checking around my area, I see that bike shops and jewelry stores are offering layaway as well as national retailers, such as Kmart, Sears (recently announced return of layaway), Burlington Coat Factory, and Goody's. There are also online layaway programs offered through eLayaway and (See links for policies.)

An alternative to layaway is to save in a regular savings account and then buy. You can earn interest while you save and have the no-fee option of changing your mind; however, the item you want to buy may no longer be available.

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Guest's picture

Thanks for the article, Julie. I think your readers will also like "A Green Tale" at

Linsey Knerl's picture

When I was a kid (20 years ago... and the last time I knew of anyone using layaway in my neck of the woods), they would take your layaway purchase and store the exact items in a layaway locker for when you came to pick it up.  You only had 10 -20 days to pick up and pay for your stuff.  You had to put 10% down, and that price you paid at the time was what you paid later... no credits for going on sale later.

I thought it was weird that they must have had an entire room devoted to "storing" stuff.  But since you don't get your 10% deposit back, it turned out to be a good deal for them.

Now our layaway is called "credit card purchases."  And we get a refund if the price drops at any time 30 days after the purchase.


Good post!

Linsey Knerl

Philip Brewer's picture

One issue with layaway is that you're generally not protected against the store going bankrupt.  If you've paid $250 on a $300 item and the store goes belly-up, there's no assurance that you'll be able to complete your purchase or get your money back.

That doesn't mean that layaway never makes sense, but it's a good reason to be careful.  A few thoughts: 

  1. Keep the period between putting the item on layaway and completing the transaction as short as possible.
  2. Put the smallest amount down that will hold the item and save the rest in a savings account (rather than making a series of payments).
  3. Evaluate the store as a credit risk (because that's what it is:  you're lending the store money until you complete the sale).
  4. Be especially careful about layaway transactions over the holidays.  Lots of businesses end up filing for bankruptcy right after the new year (having only stayed open that long in the hopes that a good Christmas shopping season would save them).
Guest's picture

My mom used to use layaway at Christmas time in order to buy large presents (think a bike or doll house) and have someplace to store it before bringing it home on Christmas Eve or the last day the store was open before Christmas. She says the small surcharge sometimes charged was worth it to keep our prying eyes and hands off the goodies before Christmas.

Guest's picture

We are a small family owned art gallery and we have many customers who use our layway to collect art. With original and limited edition pieces you can lock down the art you want and take up to a year to pay it off, to make sure you get the piece you want before it sells to someone else. Many of our internet customers use it as well as local collectors. We tried the "same as cash" program but the bank underwriting it did not make enough on late fee's from our customers. Regards Chris

Guest's picture

I've used Layaway for years, or Lay-By as we call it in Australia. Most of the major chain stores offer it often having a special counter you take the goods to to arrange the lay-by.

Many of the smaller "mom & pop" type stores do it as well. I know it is a very popular way to buy Christmas presents amongst my friends, with the local toy stores and Target store doing a special pick up on Christmas Eve arrangement with lay-bys.

The only downside is that you have to be a bit more disciplined than with credit cards and that you have to go into the store to make the payments. But it is a very handy way to buy something you want when you don't have the cash right then and without the nasty interest payments and credit card fees.

Guest's picture
Rob O.

By sheer coincidence, I was waxing nostalgic about layaways in my recent Patient Needed - Now! blog post.

I believe that there was something special about the deferred gratification that layaways offered us when we were young that kids today have no counterpart for. With the immediacy of "buy now, pay later" credit, ultra-speedy overnight shipping, and 4 a.m. shopping that we've lost the joy of anticipation.

Julie Rains's picture

Thanks for all the different ways to think about layaway. I love making art accessible through layaway btw.