# How to Pick the Best Layaway Plan

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
##### 9 Ways to Boost Your Home’s Curb Appeal for Less Than \$50

These products will instantly improve your home’s curb appeal without breaking the bank.

##### 14 Service Providers Most Likely to Lower Your Bill If You Ask

With these companies, it might be easier than you think to negotiate your monthly bill down.

##### 3 Costly Social Security Mistakes That Women Make

Women face unique challenges when planning for retirement and making these mistakes can result in a skimpier retirement.

##### 11 Secret Uses for Everyday Items That Save Money

These are simple solutions for life’s irritations.

##### 16 Products You Absolutely Do Not Need

There are plenty of great ways to spend your money, but you can safely leave these products on the store shelf.

View this page without ads

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

Most Popular
##### 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.

##### 8 Tips for Retiring Comfortably on Social Security Alone

It’s never too early to start learning how to live well while living on less.

##### Am I Eligible for My Mother’s Social Security Benefit?

Can an adult daughter tap into her late mother’s benefit?

##### The Next 5 Groups Who Will Get the COVID-19 Vaccine

The CDC has unveiled a schedule that likely will determine who gets the next doses.

##### 11 Generic Products You Should Buy at Costco

Not all generics are worthwhile, but these are among the best from Costco’s Kirkland Signature brand.

##### 9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

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

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

##### This Surprise Factor Can Raise Your Risk of Dementia

Nearly half of U.S. residents may face this threat.

##### Organize Your Home With These 10 Thrift Store Finds

Resolve to be clutter-free in 2021 with these secondhand purchases.

##### This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

##### 11 Laws You Could Be Breaking Without Knowing It

Seriously? Fibbing about the weather is a crime? This and other little-known legal traps await the unwary.

##### These Are the 3 Best Used Cars You Can Buy

These vehicles boast reliability, safety and long-lasting value.

##### 6 Legal Documents Retirees Need — but Don’t Have

Few retirees have all of these documents that are crucial to their golden years — especially during a pandemic.

##### 13 Things Seniors Can Get for Free — or Almost Free

There are many ways to get cheap or free services and goods after reaching a certain age.

##### Internet Providers Can’t Charge You for This Anymore

Starting this month, your ISP no longer can bill you for this fee.

##### Can a Divorced Widow Claim Her First Husband’s Social Security Benefits?

The rules are complicated when it comes to eligibility for survivors benefits.

##### 9 Small Expenses That Are Bleeding Your Budget Dry

Keep more of future paychecks by eliminating these budget-busting unnecessary expenses.

##### 15 Painless Ways You Can Cut Costs in 2021

Follow these tips to save, so you’ll have money for things that really matter.

##### 11 Huge Retirement Costs That Are Often Overlooked

Does your retirement budget account for all of these costs?

View this page without ads

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

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.