How to Pick the Best Layaway Plan

Photo (cc) by alliecreative

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.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
5 Ways to Save up $500,000 in 15 Years
5 Ways to Save up $500,000 in 15 Years

Even if you’re behind in preparing for retirement, there’s still a way to pull together a solid nest egg if you focus.

Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?
Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?

You could save more than $30,000 by setting aside these costly expenses for just one year.

14 Products That Keep Foods Fresh Longer
14 Products That Keep Foods Fresh Longer

We’ve rounded up innovative Amazon purchases to lengthen the life of your favorite foods and beverages.

This Is the Best Online Savings Account for 2021
This Is the Best Online Savings Account for 2021

The rate of return is just one of several reasons this account stands out.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

How to Buy Gas At Costco Without a Membership
How to Buy Gas At Costco Without a Membership

The warehouse club often has some of the cheapest gas in town. Here’s how you can get it as a nonmember.

10 Things to Stop Buying If You Want a Clutter-Free Home
10 Things to Stop Buying If You Want a Clutter-Free Home

If you like to keep things simple, avoid these purchases.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

Vacuums from this brand can last a half-century, if not longer — and they’re hot on the resale market.

A Simple Way to Silence Robocalls Today
A Simple Way to Silence Robocalls Today

A few steps can keep your phone from ringing when a spammer calls.

This Company Makes the Best Tires in America
This Company Makes the Best Tires in America

Driver satisfaction with tires is at an all-time high, but one brand stands out.

This Health Issue Can Hint at Dementia Years in Advance
This Health Issue Can Hint at Dementia Years in Advance

One type of pain is especially associated with cognitive decline.

Can I Switch to Spousal Social Security Benefits When My Ex Dies?
Can I Switch to Spousal Social Security Benefits When My Ex Dies?

Knowing when to claim can help you maximize benefits.

Medicare Will Not Cover These 6 Medical Costs
Medicare Will Not Cover These 6 Medical Costs

Don’t let these health care expenses catch you off guard in retirement.

8 Things You Should Always Buy on Amazon
8 Things You Should Always Buy on Amazon

The giant retailer shines when it comes to these things, from basics to hard-to-find specialty goods.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

12 Deep Discounts Available on Amazon This Friday
12 Deep Discounts Available on Amazon This Friday

These items are steeply discounted — but the deals won’t last long.

5 Ways to Fill Your Pantry With Free Food
5 Ways to Fill Your Pantry With Free Food

Anyone can take advantage of these resources.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

6 Reasons You Should Stop Hiding Cash at Home
6 Reasons You Should Stop Hiding Cash at Home

Stashing money around the house is anything but harmless.

5 States With the Worst Health Care for Retirees
5 States With the Worst Health Care for Retirees

All of these states are located in the same region of the nation.

Beware This Hidden Ingredient in Rotisserie Chicken
Beware This Hidden Ingredient in Rotisserie Chicken

Something foul may lurk in those delicious, ready-to-eat birds.

36 Things That Will Be Obsolete Soon
36 Things That Will Be Obsolete Soon

The writing is on the wall for dozens of things we have grown up with.

5 Products You Should Never Buy Generic
5 Products You Should Never Buy Generic

Sometimes the brand-name version is clearly superior.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.