What to consider before starting a layaway plan


When times get tough, layaway plans tend to thrive. This was the case during the Great Depression, when cost-conscious buyers…

When times get tough, layaway plans tend to thrive. This was the case during the Great Depression, when cost-conscious buyers needed easier ways to shop. So they bought items in installments, periodically donating money to the store until they paid the total.

The layaway fell out of favor for a while, especially when credit card entered the scene in the 1950s and 1960s, but plans began to make a comeback during the Great Recession. In recent years, however, layaway plans have lost ground in favor of ” buy now, pay later”Like Affirm, Afterpay, Klarna and QuadPay. For example, earlier this year, Walmart ended its layaway plan and replaced it with Affirm.

The advantage of the buy now, pay later model is, of course, that you get the goods immediately rather than weeks or months away. But the reason a lot of people are fans of layaway is that it doesn’t mean you are in debt. You basically pay now and buy later.

If you’re considering using a layaway plan, here’s what you need to know, from how to get the most out of it to stores that still have layaway programs.

[READ: The Best Time to Buy Everything.]

What is layaway and how does it work?

Layaway plans are designed for buyers who want to make purchases but may not have all the cash on hand. Layaway is basically a payment plan, where you pay for the goods over a period of weeks or months. Instead of paying for an item after you receive it – as is often the case with credit cards and buy now, pay later – you make layaway payments before you receive your purchase.

Most people who want to buy something but don’t have the funds will wait until they have more money before making the purchase. So why use a layaway plan?

In some cases, you might be concerned that the item is no longer available by the time you have enough money. If money is tight, you might worry that you don’t have the discipline to save specifically for those purchases. This is where a layaway program can come in handy. If you pay a store $ 50 for a $ 300 giveaway, you’ll likely make sure you keep making periodic payments and end up buying the item.

If you’re running out of cash, but a store doesn’t have a layaway plan (Target, BestBuy, and Amazon don’t offer these plans, for example), you might want to see if they have a layaway plan. buy now, pay later installment plan program.

With these payment plans, you receive the goods immediately and pay in installments. Just like with a layaway plan, you usually don’t pay interest as long as you make the payments on time. If you don’t, you’ll end up spending extra money on interest.

[READ: 10 Services That Allow You to Buy Now, Pay Later.]

The pros and cons of layaway programs

The main advantages of a layaway program:

– You don’t have to pay for the purchase all at once and you can stagger the payments.

No credit check required.

– No interest is charged.

The disadvantages of a layaway program:

– You pay according to the layaway plan schedule, not yours.

– There are usually fees, such as service, restocking and cancellation fees.

– You can get a refund if you cancel or don’t make all the payments, but the program fees, if any, are generally non-refundable.

Of course, there are other advantages and disadvantages. For example, a major benefit of using a layaway program is that you don’t have to worry about go into deep debt.

Best of all, if you’re having trouble making payments, your credit won’t be affected, says Zachary Johnson, associate professor of decision science and marketing at the Robert B. Willumstad School of Business at Adelphi University. Layaway can be a good idea for consumers without strong credit, he says. “It gives the consumer the option of purchasing an expensive product with weekly, bi-weekly or monthly payments. ”

Johnson says most people seem to prefer to buy now, pay later for programs that replace the layaway, but wonders if that’s a good thing in the long run.

“Research on consumers and psychology tends to suggest that delayed gratification, consistent with layaway programs or simply saving for something special, tends to promote healthier and happier psychological outcomes for consumers. “, explains Johnson.

Not that everything about layaway is great. If you have credit and money issues in general, a major downside may be the fees associated with layaway programs. A rule of thumb: The more you pay for the merchandise, the less costs matter, says David Friedman, a law professor at Willamette University who specializes in behavioral economics.

“Layaway fees at most retailers can be quite low, like $ 5 or $ 10,” says Friedman. Because of this, it would “make almost no financial sense to put a $ 100 toaster aside,” he says, explaining that an extra $ 5 or $ 10 means the toaster is really 5 to. 10% more expensive. But if you use a layaway option to buy a device with a price tag of, say, $ 2,000, Friedman says, that $ 5 or $ 10 is less than 1% of the total cost.

Keep in mind that if you cannot complete the layaway purchase, you will lose money due to the associated fees. For example, if you have to pay a non-refundable fee upfront, you won’t get them back. Additionally, you may have to pay cancellation fees and lose extra money. So while it might seem like a no-brainer to go on a layaway program, if you live paycheck to paycheck, you could still take a layaway program. financial risk.

[See: 35 Ways to Save Money.]

Stores with layaway plans

If you’re looking for a layaway program, here are a few of the remaining stores that still have it:

– Burlington and Baby Depot in Burlington.

– Kmart and Sears.

– Punch.

– Buckle

Burlington and Baby Depot in Burlington

Both stores offer layaways year-round, but the program itself is typically a 30-day in-store layaway option. To participate, you must make a deposit of 20% or $ 10, whichever is greater. There is also a $ 5 non-refundable service charge, although in some cases promotions negate this by offering you a $ 5 gift card for in-store purchases. If you cannot make all of your payments or if you cancel the layaway order, a $ 10 cancellation fee will be charged in most states (plus tax, if applicable). Not all Burlington and Baby Depot stores offer layaway programs, but most do.

Kmart and Sears

Both stores, which are owned by the same company, offer in-store layaway options and online layaway programs. Of course, there are fewer Kmart and Sears stores these days, due to the financial difficulties of retailers. However, you can put items on hold for eight weeks if you put away online and 12 weeks if you make an in-store purchase and the purchase is $ 300 or more. You have to make layaway payments every two weeks. You also have to make a deposit of $ 10 and the cancellation fee is $ 10 or $ 20, depending on whether you have opted for an eight or 12 week layaway program and if what you are purchasing is $ 300. or more. (If it’s over $ 300, there would be a $ 20 cancellation fee.) There is also a $ 5 and $ 10 service charge, depending on whether the layaway lasted eight or 12 weeks. . If you can’t pay for the entire purchase, you’ll get a refund less service and cancellation fees.

Punch

Many Hallmark’s Gold Crown stores have layaway programs from July through December. You can put an item on hold for 90 days – inside the store, not online – and simply ask the store associate if you can put the item aside. You will need to pay a minimum of 20% of the total purchase amount and will receive a written copy of the terms and conditions (which vary by store). If you are a Hallmark member and receive Crown Rewards points, you will earn them on layaway purchases of inventory items.

Loop

This clothing retailer, which has more than 400 branches across the country, offers an in-store layaway service. You will pay a minimum of 20% deposit and the merchandise will remain in the store until you have fully refunded it. Buckle suggests paying every two weeks, but that’s up to you. They ask that everything be refunded within 60 days, otherwise the merchandise goes back to the store. If you cancel the layaway, you will be refunded, less any service charges or interest.

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What to consider before starting a layaway plan originally appeared on usnews.com

Update 11/17/21: This story was posted at an earlier date and has been updated with new information.


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