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Household money and budgeting

Layaway

A store payment plan that holds an item for you while you pay for it in installments; you take it home only after it's paid in full.

What It Means

Layaway is a payment plan where a store sets an item aside for you and holds it while you pay the price in installments. You start with a deposit plus any fees the store charges, pay the rest within a set time, often 30 days according to the Federal Trade Commission (FTC), and take the item home once it's fully paid. Nothing is lent to you, since the store keeps the item until the last payment.

Try It: Plan a Layaway Payment Schedule

Every number here is an example. The store's own layaway policy sets the real deposit, fees and deadline.

Due today$60.00plus the $5 fee
Each weekly payment$60.00
Total paid, fee included$305.00
If you cancel after 2 payments, you'd get back about$170.00In this example the service fee isn't refunded, and the refund may come as cash or store credit depending on the store.

How It Sounds at Home

  • "I put the bike on layaway until December."
  • "How much is left on the layaway?"
  • "We have to pick it up by the end of the month."

The Breakdown

Worked example. A $300 item on a layaway plan with example terms: a 20% deposit, a $5 service fee, four weekly payments and a $1010,000 stepsA popular daily step goal that began as the name of a 1960s Japanese pedometer; later studies find health benefits begin well below it. See more fee if you cancel.

StepAmount
Deposit today$60
Service fee today$5
Four weekly payments$60 each
Total paid$305
Refund if canceled after two paymentsabout $170

What the result means. On these terms layaway costs $5 more than the price tag and no interestInterest rateThe yearly percentage a lender charges for borrowing money, not counting fees; the APR adds certain fees to show a fuller cost. See more, and you'd pick the item up about a month after the deposit. Canceling part way costs the service fee and the cancellation fee: in this example, the $180 paid toward the price brings back about $170, and the $5 service fee stays with the store. Saving the same $60 a week in your own account would reach $300 in five weeks with no fees, but the store wouldn't be holding the item for you at today's price.

Where it goes wrong. The deadline passes before the last payment, and the store's policy decides what happens next. That's why the FTC suggests asking about refunds and fees before you sign up, and keeping records of every payment.

Good to Know

The FTC's layaway tips include learning the store's refund and cancellation policy and any fees before you agree, getting a copy of the layaway contract, and keeping a record of each payment. Layaway fees can include storage costs, the FTC notes, and the time to pay is usually short, often 30 days. Deposits, fees, deadlines and whether a refund comes back as cash or store credit are set by each store, so read its current layaway page.

FAQ

How does layaway work?

You pick the item, pay a deposit and any fees, and the store sets it aside. You pay the rest over a set period, often 30 days according to the FTC, and collect the item after the final payment.

What happens if I don't finish paying for layaway?

The store's policy decides, which is why the FTC suggests asking about refunds and cancellation fees before you sign up. Whether you get cash backCashbackMoney a card or program pays back as a percentage of what you spend, usually as a statement credit, a deposit or a check. See more or store credit, and what fee comes off, vary by store.

Is layaway better than buy now, pay later?

They work in opposite order. With layaway the store keeps the item until it's paid for, so there's no balance owed on something you already have, while buy nowBuy now pay laterA short-term loan at checkout that splits a purchase into a few payments, most often four interest-free installments with the first due when you buy. See more, pay later hands you the item after the first payment. Compare the fees and cancellation terms of the specific plan.

Do It in Buhata

Goals, Countdown

With Plus, set the layaway balance as a target in Goals and add the pickup deadline to Countdown, so you can see what's left to pay and how many days you have.

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Related Terms and Categories

  • Buy now pay later

    A short-term loan at checkout that splits a purchase into a few payments, most often four interest-free installments with the first due when you buy.

  • Rent-to-own

    An agreement to rent an item such as furniture or a TV for weekly or monthly payments, with the option to own it after paying for the full term.

  • Sinking fund

    Money set aside in small, regular amounts for a known future cost, so the bill doesn't land on a single paycheck.

  • Holiday budget

    A spending plan for the holiday season that sets how much you'll spend on gifts, food, travel and decorations before the shopping starts.

  • Impulse spending

    Buying something on the spur of the moment, without planning for it or checking it against your budget.

Household money and budgeting

Sources

Federal Trade Commission, "Buy Now, Pay Later, Rent-to-Own, Lease-to-Own, and Layaway"; Federal Trade Commission, "Tips for Consumers About Layaway Plans" (2009); Federal Trade Commission, "Holiday Shopping on a Budget: Tips About Layaway Plans" (2009)

Last updated .