Layaway is a favorite choice among consumers and it has started to make a comeback this holiday season. What’s even more interesting – customers couldn’t be more excited. After all, what’s not to love about a service that provides the convenience of a credit card without the expensive interest rates? Sure, you’ll have to wait until the full balance has been paid before receiving your items, but it’s still likely to happen much faster than on borrowed money. Overall it can be an excellent service to take advantage of, but there are a few things that consumers should be aware of before putting their next big purchase on layaway.
Layaway Has Limits
Just because a major retailer advertises a layaway plan on the commercials doesn’t mean that the service is without limitations. For example, some stores within the chain may opt out of the program. Others may have limits on which items layaway is available for. This can be limited to those found in a certain part of the store or to a specific number of items. Many department stores will also only offer layaway seasonally, such as during the holidays. You should call your local store or check its website to determine if a layaway plan is being offered prior to your visit.
Layaway Has Fees
You should also be aware of all fees charged on a layaway plan. Nearly every retailer charges an upfront fee. This can be worth the added convenience, but fees should usually raise a red flag. If a charge is applied periodically while an item is on layaway, it’s probably a bad idea to use the program. Fees may also be charged if a payment is made late or payments end altogether. The most common upfront fee is $5 or $10. It is important to think about the total value being “laid away” versus the fee being paid. If you are only going to layaway a $50 toy, a $10 fee is actually 20%, which is more than any credit card interest you should pay.
Layaway and Sale Items
Another concern among consumers is what happens when the price of the product on layaway is suddenly reduced within the store. The outcome will depend on the store, as each policy is different. Some stores will also lower the layaway price, thereby allowing the customer to pay off their balance sooner. Others will require customers to pay the original amount and may even charge them a fee if they don’t. This may also change in the unlikely event that a price becomes more expensive. If the item is likely to go on sale during the payment period, it’s important to determine the specific policies regarding a change in price.
Layaway Time and Availability
You also need to find out how long items can be held in layaway programs. One of the great benefits offered by layaway services is that you can determine a timeline that fits your budget. However, not all retailers will allow this level of flexibility. It’s important to know exactly how long your plan is valid for and how much monthly payments will cost as a result. Be sure to find out when items will be available after the balance has been paid. Many stores will hold merchandise within a safe section of the building until the customer is ready to pick them up. However, some retailers will actually hold items in another location, usually meaning that items will not be immediately available after paying off the balance. This could be a problem for gifts that are to be handed out at a specific time.
Finally, be sure to carefully read any documents that you must sign. An associate may have described a lucrative plan offered by the store, but that doesn’t mean the contracts are subject to change during the layaway period. Any fees, specific policy requirements and even legal issues are discussed in these documents. And you will be held responsible for any provisions detailed within a contract.
Layaway Store List
Babies R Us
Burlington Coat Factory
Toys R’ Us
Readers, have you ever used layaway? Would you recommend it or avoid it?
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.