How to Pick the Best Layaway Plan


What's Hot


2 Types of Black Marks Might Vanish From Your Credit File SoonBorrow

6 Ways the Obamacare Overhaul Might Impact Your WalletInsurance

7 Dumb and Costly Moves Homebuyers MakeBorrow

This Free Software Brings Old Laptops Back to LifeMore

Obamacare Replacement Plan Gets ‘F’ Rating from Consumer ReportsFamily

Beware These 12 Common Money MistakesCredit & Debt

21 Restaurants Offering Free Food Right NowSaving Money

17 Ways to Have More Fun for Less MoneySave

House Hunters: Beware of These 6 Mortgage MistakesBorrow

30 Household Uses for Baby OilSave

25 Ways to Spend Less on FoodMore

Nearly Half of Heart-Related Deaths Linked to These 10 Foods and IngredientsFamily

5 Surprising Benefits of Exercising Outdoors in WinterFamily

10 Ways to Save When You’re Making Minimum WageSave

Boost Your Credit Score Fast With These 7 MovesCredit & Debt

7 Painless Ways to Pay Off Your Mortgage Years EarlierBorrow

The Most Sinful City in the U.S. Is … (Hint: It’s Not Vegas)Family

The True Cost of Bad CreditCredit & Debt

10 Companies With the Best 401(k) PlansGrow

This Scam Now Tops ID Theft as the No. 2 Consumer ComplaintFamily

6 Stores With Awesome Reward ProgramsFamily

6 Ways to Save More at Lowe’s and The Home DepotSave

6 Healthful Treats for Your DogFamily

New Study Ranks the Best States in the U.S.Family

Thousands of Millionaires Moving to 1 Country — and Leaving AnotherGrow

Strapped for College Costs? How to Get the Most From FAFSABorrow

6 Overlooked Ways to Save at Chick-fil-AFamily

Ask Stacy: What’s the Fastest Way to Pay Off My Mortgage?Borrow

Where to Sell Your Stuff for Top DollarAround The House

8 Ways to Get a Good Price on a Shiny New AutoCars

Ask Stacy: How Do I Start Over?Credit & Debt

Secret Cell Plans: Savings Verizon, AT&T, T-Mobile and Sprint Don’t Want You to Know AboutFamily

30 Awesome Things to Do in RetirementCollege

14 Super Smart Ways to Save on TravelSave

The Rich Prefer Modest Cars — Should You Join Them?Cars

You’ll Soon Pay More to Shop at CostcoSave

10 Ways to Save When Your Teen Starts DrivingFamily

Even during the holidays, layaway isn't always worth it. Sometimes you're better off paying with your credit card. But if you're considering layaway, here's how to do your homework first so you get the best value for your money.

Five years after doing away with layaway, Walmart has brought it back for the holidays. The retail giant has announced the news on their website, their Facebook page, and even TV – and they’re not alone.

As the recession drags on, Walmart joins big names like Sears and Toys R Us, which have recently revived layaway or reminded consumers that they offer the service. As MSNBC recently put it, “With massive unemployment and consumers still struggling to manage their daily costs, discount retailers have to pull out all the stops to win over new customers, or even retain the ones they have.”

Despite the economy, some experts still warn against layaway. Last month, Cornell University professor Louis Hyman called the financing option “decidedly worse than most credit cards” in a  New York Times op-ed:

Imagine a mother going to Wal-Mart on Oct. 17 and buying $100 worth of Christmas toys. She makes a down payment of $10 and pays a $5 service fee. Over the next two months she pays off the rest. In effect, she is paying $5 in interest for a $90 loan for two months: the equivalent of a credit card with a 44 percent annual percentage rate, a level most of us would consider predatory.

By comparison, even a card with an 18 percent A.P.R. would charge only half as much interest – and she could take those presents home the same day.

Ouch!

But for some consumers, like those who don’t have access to credit, layaway may make sense – especially when it means putting a smile on a loved one’s face during the holidays. If you’re considering this option, a little homework can save you a lot of trouble…

Step 1: Do the math

In an ideal world, nobody would pay either interest or a layaway fee to shop for the holidays, because we’d all use cash. Unfortunately, this isn’t an ideal world, so if you don’t have the cash, you’ll have to consider your options. If you have credit cards, compare the interest you’ll pay (this requires knowing both the rate on your card and how long you’ll take to pay it off) to layaway service fees. If the interest you’ll pay to your card company is less than the service fee to a store, use your credit card. If the interest would be greater than the service fee, layaway makes more sense.

Step 2: Pick the right store

First, go online to find out whether the stores where you shop offer layaway. While the service has become more common since the recession started, not all stores offer it. Walmart and Kmart do, for example, but competitor Target doesn’t. Sears does but JCPenney doesn’t.

Then consider whether you plan to shop in a brick-and-mortar store or online. Some stores, like Best Buy and Toys R Us, only offer layaway for in-store purchases.

A cheat sheet

A breakdown of who offers what and for how much…

Babies R Us

  • Eligible items:  See the list on their website
  • Down payment: At least 20 percent of the total purchase price
  • Service charge: $5
  • Cancellation fee:  $10
  • Available: In stores only

Best Buy

  • Eligible items:  All items, but the total purchase price must be at least $250
  • Down payment: 25 percent of total purchase price
  • Service charge:  5 percent of total purchase price
  • Cancellation fee:  N/A
  • Available: In stores only

Kmart

  • Eligible items: Most items (if you shop online, look for the words “Available for Layaway” on product pages)
  • Down payment: $15 or 10 percent of the total purchase price (whichever is greater)
  • Service charge: $5
  • Cancellation fee: $10
  • Available: In stores and online

Sears

  • Eligible items: Most items (if you shop online, look for the words “Available for Layaway” on product pages)
  • Down payment: $20 or 20 percent of the total purchase price (whichever is greater)
  • Service charge: $5
  • Cancellation fee: $15
  • Available: In stores and online

Toys R Us

  • Eligible items:  See the list on their website
  • Down payment: At least 20 percent of the total purchase price
  • Service charge: $5
  • Cancellation fee:  $10
  • Available: In stores only

Walmart

  • Eligible items: Toys, electronics, and jewelry departments
  • Minimum: $50 total purchase, and each individual item must cost at least $15
  • Down payment: 10 percent of total purchase price
  • Service charge: $5
  • Cancellation fee: $10
  • Available: In stores only

For more tips for a smoother holiday shopping season, check out How to Spot the Best Return Policies and visit our Deals page.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!

💰🗣📰

Read Next: Costco Releases Dozens of New Deals

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 2,011 more deals!