Is Layaway Still Worth It?

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A shopping payment option that was popular decades ago has made a comeback in recent years, as some customers have shied away from the use of credit cards.

The downturn in the economy several years back sent some shoppers looking to layaway as an alternative, especially during the holiday season. Under layaway, shoppers can set an item aside and pay for it over time; they only get to take the item home after it's paid for in full. While many stores phased out layaway in the 1990s, it's made a return at many major retailers including Walmart, Kmart, and Toys R Us.

Layaway is often seen as a more responsible way to pay for big-ticket items and for when budgets are tight. But what are the positives and negatives of layaway?

1. PRO: You Don't Need a Credit Card

Some may see this as a downside to layaway, but it is a hugely positive thing for people who are looking to avoid racking up credit card debt, or otherwise can't or won't use a credit card. By using layaway, you can set an item aside, save for it, then acquire it when you have the cash in full. So you get the item and avoid debt in the process.

2. PRO: You Can Lock in High-Demand Items Early

During the holiday season especially, there are certain items that always fly off the shelves. By putting something on layaway in advance of the holiday season, you can guarantee you'll have it.

3. PRO: Almost Anyone Can Do It

In most cases, you can sign up for layaway without a credit check. All you need is some form of identification to prove you're over 18, and a down payment for the items you want to buy.

4. CON: You Can't Use Layaway for Many Products

Stores make their own determination as to what products are available through layaway. Often, very popular products are restricted, and there are often minimum dollar limits. In this way, layaway is more limiting than credit cards, which can be used to buy almost anything.

5. CON: Fees

By using layaway, you avoid potential interest payments from your credit card, but there are still expenses. Many stores charge $5 or more just to sign a layaway contract, and you may have to pay $10 or more if you change your mind and decide not to buy the item. You may also incur additional fees if you don't make payments in a timely fashion.

6. CON: It's Not Offered All the Time

Last year, Walmart only offered layaway from August 28 to December 14, to service the holiday shopping season. Other stores offer it during the holidays and the spring, but not year round.

7. CON: There Are Payment Terms

Layaway isn't quite as simple as setting aside an item and getting it when you pay for it in full. Most stores still expect you to make payments according to a schedule. Kmart, for instance, offers only eight or 12-week contracts and requires payments every two weeks. Toys R Us offers only 90-day contracts, with 40% of the total price of an item due within 30 days and 70% of the item paid for within 60 days.

8. PRO or CON: You're Locked Into the Price

If you put an item on layaway and the price drops, you can't change the terms of the layaway contract to pay less. The only way around it is to cancel the purchase — mostly likely incurring a fee in the process — and buy the item elsewhere. On the flipside, you can lock in a price on layaway if you believe a product may shoot up in price at some point.

Have you ever purchased on layaway?