Pros and Cons of Layaway

Pros of Layaway
You don’t have to come up with all of the money at one time.

Big-ticket items may not be out of reach, even if you don’t have a credit card, or if your card is at its limit.

Layaway is a good option if you choose not to have or increase credit card debt and/or if you’re following a debt reduction plan such as that advocated by Dave Ramsey.

In many cases, the fees for layaway (if any) are less than the interest rate of credit cards.

You can set aside Christmas gifts or other major purchases without worrying that they will be out-of-stock before you have the money to buy them. (Layaway is especially popular with hard-to-find electronics such as the Nintendo Wii.)

You can keep holiday presents stored in layaway, so the merchant is holding them for you and you don’t have to find room in your home or hide them from snooping kids or spouses. (This technique is advocated by Kate Gosselin in the TLC show Jon & Kate Plus 8.)

You can beat the Christmas rush and shop before the stores get too crowded.

You can plan ahead for special occasions such as weddings.

Layaway can be an alternative to “impulse buying.” If you change your mind about buying something, you can back out of buying it (less a cancellation fee, in some cases.)

Layaway “forces” shoppers to plan ahead, which can be an asset to people who have trouble simply saving up. By forcing people to budget, using layaway instead of credit can teach shoppers to delay gratification, build patience and add more discipline to their spending habits.

You can “lock in” a lower pricing during a sale, even if you can’t afford to buy the item outright while it’s on sale.

If the price of an item goes down during the layaway period, you may be able to get it for the lower price. (Some stores limit adjustments, however.)

If you fail to complete the purchase, it is not reported to credit bureaus.

Cons of Layaway
If the store charges a fee for layaway, it could translate to a relatively high “interest rate,” especially if the item put on layaway is of relatively low value. Layaway plans that include a fee are better deals for more expensive products, such as electronics. (Look for cases in which the layaway fee equates to less than 10 percent of the item’s value.)

If the price of an item goes down while on layaway, you may or may not be able to get it for the lower price. (Some stores, such as Kmart, set a limit of one “price adjustment.”)

Some argue that if people can’t afford to pay for something all at once, they shouldn’t be buying it at all.

Layaway may lead undisciplined shoppers, or those with very low budgets, to spend money on things they really can’t afford at all.

Using credit cards to make payments on a layaway plan would probably defeat the purpose of using layaway.

Each time you go into the store to make a payment, you may find yourself tempted to purchase something else you see for sale along the way to the layaway counter.

If you miss a payment, the items will likely be put back on the sales floor and you’ll may be out a service fee and/or cancellation fee.

Very, very rarely, the shopper may lose all the money put toward the item if he or she fails to complete the purchase. However, none of the major retailers listed on this site have such a draconian policy. At worst, the refund may be in the form of store credit or a gift card.

If the store goes out of business or enters bankruptcy, it may be difficult or even impossible to reclaim your money or goods.

Be sure to compare prices if buying on layaway, especially online. One online layaway company charges $139.99 for the Nintendo DS Lite, but that console retails for $129 practically everywhere else.

Some layaway detractors have a philosophical issue with layaway, saying people should just “save up” for what they want and not rely on a program to force them to do so.

5 Responses to “Pros and Cons of Layaway”

  1. Lana Vash says:

    I understand and plan to use the club and layaway this year.

  2. stefhan wilson says:

    i am going self employed and wish to do lay-by and would like to know how you can register for it because the person who will be giving you money each week needs some reasurence that i am not going to run away with there money after a few weeks thank you stef

  3. Anomyyty says:

    Stefhan, just ask for a payment receipt when you put any money on the item in layaway.

  4. ShaunMD says:

    I wish that all stores had lawaway, that would be a way to save some money. Not everyone can afford to buy evrything at once. Trust me I will be using it on the regular. Great way to build children’s clothing collections.

  5. laure123 says:

    I have an item on lay away its a ring, but I changed my mind and want another ring that I saw.. can I just change the rings out and pay the diffrence for the new ring???

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