As you’re perusing those tempting Black Friday offers, you might encounter stores promoting layaway as a viable payment option. This old-school system lets you pay for an item over time, which can alleviate the burden on your wallet while juggling other expenses. However, keep in mind that you won’t actually receive the product until it’s fully paid for, and you may have to deal with some additional fees.
Let’s dive into what layaway entails and see if it’s a suitable choice for your holiday shopping.
What Exactly is Layaway?
"Layaway is an interesting throwback method for purchasing something you can’t afford to pay for in one go," explains Lisa Gill, a seasoned investigative reporter at Consumer Reports focused on financial topics.
Essentially, it’s a payment plan where you start with a down payment on a product, which can be a fixed amount or a percentage. You then pay off the rest in chunks or in one final sum, whereas the seller holds onto the product. You’ll get your hands on it once every cent is paid.
Layaway vs. Buy Now, Pay Later Plans
Both layaway and buy now, pay later (BNPL) options, courtesy of providers like Afterpay and Klarna, let shoppers divide the cost of an item into smaller amounts. However, they diverge in some crucial areas.
With layaway, your coveted item sits with the retailer until all payments are settled. BNPL gives you immediate possession. In terms of payment duration, layaway can stretch from a few weeks to several months, while BNPL plans typically last six to eight weeks through four payments, Gill notes.
Layaway often involves cash, checks, or credit card payments, but this depends on store policy. BNPL payments are mostly tied to credit or debit cards or bank accounts.
An important distinction—layaway doesn’t impact your credit score, positively or negatively. The store simply holds onto your purchase as collateral if payments are missed. Conversely, with BNPL, you’re essentially taking on a low-interest loan, which can mean a credit check. Delayed payments here might not only incur fees but also ding your credit score if sent to a collections agency.
Pros and Cons of Layaway
While layaway doesn’t reduce the overall purchase cost, it does allow for smaller, more digestible payments, thereby ensuring that your chosen item remains yours until you’re ready financially.
But there’s a downside. Although it doesn’t affect your credit score, the favorable record of on-time payments doesn’t aid it either. Plus, you might face non-refundable deposits or fees for storage and cancellations. Depending on the specifics, you could end up shelling out more than you would by paying outright.
As Michelle Smoley, from Bright Horizons College Coach, points out, “If a consumer can’t meet the payment schedule, they forfeit both the money and the item put on layaway.” Still, this scenario is preferable to grappling with debt collectors.
Which Stores Still Embrace Layaway?
Layaway isn’t as widespread as it used to be. "It was more common before credit cards were so accessible and during a time when in-store shopping was more prevalent," Smoley remarks.
Most department and large retail chains, including Walmart and Amazon—which stopped offering Amazon Layaway in October—have phased it out. Nonetheless, you might find layaway options at smaller establishments like vintage shops and pawn brokers, and a few major retailers still hold onto this payment method.
As of this note, Hallmark Gold Crown stores are among those offering layaway. Still, it’s crucial to check the details as some retailers may restrict layaway to certain products or locations.
Is Layaway a Smart Move for Black Friday Shopping?
If money’s tight and credit isn’t an option, layaway could be a strategic choice. It keeps you from accruing debt and shields your credit, while also helping you secure an item in advance of peak shopping mayhem.
That said, beware that following a layaway timeline might mean missing holiday delivery deadlines. Budgeting can be tricky. Smoley warns, “Layaway plans might tempt you into overspending, so it’s essential to have a repayment plan before committing.”
Consider if you’ll manage payments despite potential unforeseen expenses. Reflect on how crucial the purchase is, and explore other avenues like retailer secondhand sections for refurbished or open-box deals, advised by Gill. Shops like Best Buy, Wayfair, and GoodBuy Gear offer such discounted selections.
Alternatively, saving up for a one-time purchase might eliminate extra fees. By setting up a dedicated savings account, you can avoid any uncertainty.
If layaway seems right for you, ensure you understand the payment terms thoroughly before signing anything.
