Understanding Layaway Plans: Benefits, History, and Available Retailers

Search Fintrev

Search our guides, reviews and glossary.

A layaway plan is a purchase arrangement in which a store holds an item for you after you pay a deposit. You then pay the rest of the price in installments over a set period, and you take the item home only after the full balance is paid. “Laying away” the item reserves it at the agreed price. The store keeps possession until the last payment clears.

Because the store never hands over the goods before it is paid, layaway is not a loan. That one feature explains most of how it differs from credit cards and buy now, pay later (BNPL) financing: no credit check, usually no interest, and generally no effect on your credit score if the plan falls through.

How layaway works

The basic sequence is similar across retailers, even though the specific numbers vary:

1. Choose eligible merchandise. Many programs restrict layaway to certain categories or a minimum purchase amount. It is often aimed at higher-priced goods such as jewelry and electronics. Low-cost items and some categories, such as food, are commonly excluded.
2. Pay the deposit. The down payment is typically a percentage of the price or a fixed dollar amount, and many plans require whichever is greater. Some also collect a service fee at the start, often nonrefundable.
3. Follow the payment schedule. The plan sets a term (for example 30 days, 8 weeks, 12 weeks or 90 days) and sometimes a fixed number of installments. Some stores accept payments only in person. Online layaway services usually draw scheduled payments from a checking account.
4. Pick up the item. Once the balance reaches zero, the merchandise is released to you. Some holiday programs set a hard pickup date in addition to the payment deadline.

If you stop paying or cancel, the store returns the item to its inventory. The money you have already paid comes back in one of three ways, depending on the policy: a full refund, a refund minus fees, or store credit toward a future purchase. That refund policy matters more than any other single term in the plan, because it decides how much of your money is at risk if your budget changes.

A “90-day layaway” simply means the plan’s term is up to 90 days: the full price must be paid within that window for you to collect the item. The term length sets how large each payment has to be, because the same balance gets divided into fewer or more installments.

Worked example

The numbers below describe a hypothetical plan to show the mechanics. They are not any retailer’s terms.

Assume an item priced at $300 and a plan with these terms:

• Deposit: 10% of the price or $15, whichever is greater
• Service fee: $5, nonrefundable
• Term: 8 weeks, four equal payments every two weeks
• Cancellation fee: $15

Starting the plan. 10% of $300 is $30, which is more than $15, so the deposit is $30. Add the $5 service fee and you pay $35 on day one.

Installments. The remaining balance is $300 − $30 = $270. Divided into four payments, that is $67.50 every two weeks.

Total cost. $300 + $5 = $305. The only extra cost is the flat fee, which equals about 1.7% of the price.

If you cancel after two installments. You have paid $30 + $67.50 + $67.50 = $165 toward the item, plus the $5 fee. Under this hypothetical policy, the store keeps the $15 cancellation fee and the $5 service fee is not returned, so you get back $150 of the $170 you paid out. If the policy pays refunds as store credit, that $150 can only be spent at the same retailer.

Why fixed fees matter on small purchases. The same $5 fee on a $40 item equals 12.5% of the price. Flat fees feel trivial on a large purchase and expensive on a small one. That is one reason some retailers set minimum amounts for layaway.

What layaway costs: fees, not interest

Traditional layaway generally does not charge interest on the unpaid balance. There is no lender and no borrowed money, so there is nothing for interest to accrue on. The retailer’s costs (storing the item, bookkeeping, and holding stock it cannot sell) are covered through fees instead. Common ones include:

• Service or setup fee, often charged once at the start and frequently nonrefundable
• Cancellation fee, charged if you back out
• Late or default penalties, if you miss payments or the deadline
• Fees in some plans when you cancel after paying in full

Not every plan is interest-free, and some stores leave fees and interest to individual locations. Ask for the complete terms before paying the deposit. The Federal Trade Commission publishes both consumer advice on layaway and guidance for businesses that offer it, which reflects how much the terms can vary from store to store.

Why shoppers and retailers use layaway

For shoppers, layaway suits a specific situation: you want an item now, you can’t pay the whole price at once, and you don’t want to borrow or can’t qualify to. It is open to people with poor or thin credit because the seller takes almost no risk. If the deal fails, the store still has the merchandise. It also enforces discipline. The deposit and schedule commit money to the purchase before it can be spent elsewhere, and you can’t end up owing more than the agreed price plus fees.

For retailers, layaway reaches lower-income customers who would otherwise not buy at all, and it locks in a sale with an upfront commitment. The costs are holding inventory off the sales floor and administering many small payment accounts. Those costs are a large part of why layaway programs shrank.

Online layaway

Online layaway moves the process off the store counter. Scheduled payments are typically drafted automatically from a checking account, so there is no need to visit a store to make each installment. The merchandise usually stays at a distribution center instead of taking up retail storage space, which reduces the retailer’s handling and bookkeeping costs. eLayaway is one service that has run layaway programs on behalf of retailers, including Kmart, Sears and Marshalls.

Layaway vs. credit cards

Both layaway and credit cards let you pay for something over time, and both can carry late fees and penalties for default. Everything else about them differs:

The deciding question is whether you can pay the card balance in full. If you can clear the statement balance by the due date, a card gives you the item right away, no deposit, possible rewards and a positive payment history, all at no interest cost. If you would carry the balance for months, interest compounds on what you owe and can push the total cost well above the price tag. For how that buildup works, see compound interest. In that case, layaway’s flat fees are often the cheaper path, at the cost of waiting for the item.

Layaway vs. buy now, pay later and lease-to-own

These options are easily confused with layaway because they all involve installments. They are structured differently.

Buy now, pay later. A BNPL provider pays the merchant and lends you the money, so you take the item home immediately. Walmart replaced its layaway program with Affirm financing in 2021. Under that arrangement, repayment runs from three to 24 months depending on the loan size, and the loan may carry interest. Opening an Affirm account doesn’t change your credit score, but purchases financed through it might. With BNPL you hold the goods while you owe money. With layaway, the store holds the goods while you pay.

Lease-to-own. Here you take the item home and make lease payments until you own it. Big Lots’ Progressive Leasing option, for example, was described as a 12-month-to-ownership arrangement (three months in California) with no credit required, purchases up to $3,000, early payoff allowed, and weekly, biweekly or monthly payments. The total paid under a lease can differ from the sticker price, so compare the full cost of ownership, not just the payment amount.

Price hold. Big Lots also offered a Price Hold program for furniture that locks in an item’s current price while it is out of stock or until you finish paying. It had no set payment deadline, but customers were asked to notify the store when they were within two weeks of paying off so the item would be ready for pickup.

History of layaway

Layaway became widespread in the United States during the Great Depression of the 1930s. Few households had cash for larger purchases, and consumer credit was limited, so paying gradually while the store held the item made sense for both sides. It remained a common way to buy until credit cards became mainstream in the 1980s and gave shoppers instant possession instead of a wait.

Walmart’s program traces the decline and revival. The company ended layaway in September 2006, after 44 years, citing falling demand and rising costs. In September 2011, after the Great Recession had tightened consumer credit, Walmart brought it back, but only for the holiday season. It kept that seasonal program until 2021 and then replaced it with Affirm’s BNPL financing.

That shift mirrors the wider market. The post-2008 comeback faded as BNPL grew, because BNPL offers what credit cards offered decades earlier: you get the item now instead of waiting.

Retailers that have offered layaway

Some retailers still run layaway, but programs come and go, are often seasonal, and frequently vary by location. The terms below are as the retailers published them. They describe each program’s structure and may have changed, so confirm the current policy with the store before you commit.

Army & Air Force Exchange

The military retailer has offered layaway with a 15% down payment and a normal service fee of $3, waived during some holiday promotions for eligible items paid in full and picked up by the promotion deadline. Electronics such as notebooks, tablets, iPads and smartwatches have had an earlier payment and pickup deadline. A $5 fee applied to cancellations made after the item was fully paid.

Burlington Coat Factory and Baby Depot

These stores share an owner and a single layaway policy, available only at participating locations. Merchandise can be held for 30 days. The down payment is $10 or 20%, whichever is greater, plus a nonrefundable $5 service fee. Payments are made in store by cash, check or credit card, either in installments or in full. Canceling costs $10. Food, wall art, rugs, lamps and furniture are excluded.

Big Lots

Big Lots did not run traditional layaway. Its two alternatives, Price Hold for furniture and Progressive Leasing, are described in the comparison section above.

Hallmark Gold Crown

Some Hallmark Gold Crown stores have offered layaway from July through December, with terms of up to 90 days and a 20% down payment. Fees, cancellation rules and any interest charges are set by individual stores.

Kmart and Sears

Both are owned by Transformco and have offered layaway online through eLayaway, with 8-week or 12-week terms paid in four installments.

• Sears: down payment of $20 (8 weeks) or $35 (12 weeks), or 20% of the price, whichever is greater. Nonrefundable service fee of $5 (8 weeks) or $10 (12 weeks). Cancellation fee of $15 (8 weeks) or $25 (12 weeks).
• Kmart: down payment of $15 or 10% of the price, whichever is greater, with occasional $10 promotional deposits. Service fee of $5 (8 weeks) or $10 (12 weeks). Payments are due every two weeks.

Marshalls

Marshalls has offered layaway through eLayaway at some locations. The application takes a few minutes and approval can come the same day. The plan requires a 10% down payment and a nonrefundable $5 service fee, and installments begin within 30 days.

Limitations of layaway

• You wait for the item. If you need something now, such as a replacement appliance or a winter coat in a cold snap, layaway doesn’t solve the problem.
• Your money is tied up. Payments sit with the retailer until pickup. If you cancel, part of it may be lost to fees or returned only as store credit.
• Flat fees hit small purchases hardest, as the worked example shows.
• Availability is narrow. Programs are often seasonal, limited to participating stores and restricted to certain merchandise.
• No credit benefit. On-time layaway payments generally don’t build a credit history the way well-managed credit accounts do.
• Deadlines are firm. Missing the final payment or pickup date can trigger cancellation under the plan’s terms.

Layaway works best as a budgeting tool for a planned purchase you can wait for, such as holiday gifts bought months ahead. It fits within broader financial literacy habits: knowing the full cost, the refund terms and the alternatives before you commit.

FAQs

The Bottom Line

Layaway suits shoppers who can wait for a planned purchase, such as holiday gifts, and who want to avoid borrowing or cannot qualify for credit. Before paying a deposit, get the full terms, especially the refund policy and fees, since flat fees weigh heavily on small items. If you can pay a credit card balance in full by the due date, a card is usually the better option.