Layaway works differently than shopping with credit cards or using installment billing plans. With layaway you make payments over time, but your purchases stay in the store until you finish paying for them.
While every store has their own rules, most layaway programs follow the same four basic process:
You pick out the items you want to put on layaway. Many stores only offer layaway for items in certain departments, such as jewelry or electronics.
You make a down payment. The down payment varies by store. Some stores let you choose the amount, while others charge an amount based on your total purchase price.
You make small payments over time. You can make weekly, biweekly, or even monthly payments, depending on the store’s policy.
Once you pay off the total purchase price plus any layaway fees, you can pick up your items.
Pros of Layaway Plans
Compared to other methods of financing purchases, layaway can be your best option for the following reasons:
While layaway does come with fees, you won’t be charged interest on your purchases. Even with the fees, layaway may cost less than charging your holiday purchases to a credit card.
For example, suppose that in December you charge a $900 TV to a credit card with 18% interest. If you pay the total off in February, you’ll have paid one month’s interest, or $13.50. This makes the $5 service fee more appealing, and in this case layaway is the better option.
2. More Buying Options
Layaway provides an alternative to using a credit card to pay for purchases. If you do not have a credit card and don’t wish to acquire a store card, layaway provides another method to pay for purchases over time.
If you have a credit card but would like to make it through the holidays without charging all of your gifts, layaway may be the best option for you.
3. Availability of High-Demand Items
Layaway comes in handy during the busy holiday season when popular electronics and toys can sell out quickly. Putting a popular item on layaway now guarantees you will have it for the holidays.
4. Available Online
Some retailers offer layaway for purchases made through their online stores. Online layaway saves you the hassle of dealing with holiday shoppers, waiting in long lines, or going to several stores looking for a popular item.
5. Easy Acceptance Criteria
Unlike a credit card, layaway programs do not conduct income or credit checks before approval. To qualify for layaway you simply need proof of identification showing that you are at least 18 years of age and a down payment.
Since acceptance policies are generally pretty relaxed, even people with past credit problems can qualify for a layaway program.
Cons of Layaway
Layaway offers convenience and gives you another option for buying your holiday gifts. Unfortunately, the news isn’t all good – layaway has several disadvantages you also need to consider:
Layaway fees can be exorbitant, especially for smaller purchases. For example, paying a $10 service fee on a $600 laptop may be acceptable, but paying a $10 service fee for a $50 toaster means adding a preposterous 20% to the total cost.
Unless you’re worried about a hot ticket item selling out before the holidays, wait until you have the cash to buy smaller items to avoid service fees.
2. Down Payments
Unlike a credit card, most layaway programs require that you pay a down payment before the store will hold your purchases. Down payment amounts vary by store, but some stores can charge up to 10%, a sizable fee for big-ticket items.
3. Strict Payment Terms
Many layaway programs come with strict payment terms. For example, one retailer may require you to make a payment in-store every two weeks until you pay off the purchases. Under these terms, you’ll have to drive to the store every other week to make a small payment.
Other policies may allow you to pay on your own schedule, but require that you make your final payment by a certain date. If you miss that date, you risk losing the items. When you put something on layaway, you have to deal with the retailer for several weeks.
4. Potential Losses
People enter into layaway programs with the best of intentions, but things happen. You may pay off half of your purchase, but then realize you cannot pay for it entirely. Or you might realize that you no longer want the item after making payments for several weeks.
You will not lose the money you paid if you do not complete your layaway agreement, but you will have to pay more fees.
Most stores charge a cancellation fee for unhonored or canceled layaway agreements, and some stores charge an additional restocking fee to put the items back on the shelves.
Retailers typically put a limit on the type of purchases you can place on layaway. For example, a retailer may only offer layaway for electronics, jewelry, or other big-ticket items, but if you want to use layaway to pay for a popular toy, you may have to go to another retailer.
Other stores may place a minimum dollar limit on their layaway program. In this case, you would not be allowed to put any individual item with a price tag beneath the limit on layaway, even if your total purchase was over the limit.
Other Purchasing Options at Target
Although Target doesn’t do layaway, it does offer several other payment methods and purchasing options. Accepted payment methods include:
Third-party gift cards (American Express, Discover, Visa, Mastercard)
Since Target doesn’t offer layaway, you can pay for your purchase over time by using a credit card, including Target’s own REDcard.
Note:This method doesn’t allow you to store the item while paying for it and that your purchase will accrue interest if you pay it off over several months.
Other Stores With Layaway
Several other large retailers, such as Walmart (as previously reported), offer layaway programs with fairly low fees and minimal penalties.
Layaway is a great option only if you need to finance a few of your holiday gifts this year but do not qualify for a credit card or in-store financing. The program also works if you want to try to avoid racking up more credit card debt this holiday season.
If this article is useful then so will your friends, why not share it on your social media platforms.