Stores With Layaway Option Seeing Increased Interest

I know it is en vogue to bring back things from the past, but this is a trend I thought had gone forever:  layaway.  With tightening credit policies, and maxed out consumer debt, it seems layaway is making a comeback.  Personally, I am not a big fan of layaway, ranking it somewhere between using a credit card and taking on a rent-to-own contract.

An Alternative to Layaway

In the Frugal household we have created our own sort of layaway plan.  When we have our hearts set on a big-ticket item we relabel a “subaccount” at ING Direct and transfer a little money there from each paycheck.  For instance, we recently needed to save up a couple hundred dollars for new tires.  Rather than charging them, or financing them through the tire dealer, we gave a subaccount the nickname “Tires” and transferred $25 a paycheck (every two weeks) into this account.  In just a couple months we had enough money to pay cash for new tires.

The account described above is often referred to as a sinking fund, where funds are “sunk” in regular intervals to pay for an item.  The concept can be expanded to cover annual, or semi-annual, insurance premiums and other infrequent expenses.  When you think about it, an escrow account at your mortgage is just a sinking fund where a little money is siphoned away from each payment and held to pay insurance premiums and tax bills.

Layaway is Just a Forced Savings Account, With Bad Terms

My main problem with layaway is that is really a forced savings account with fees and sometimes a nasty cancellation policy.  Instead of agreeing to purchase an item by a certain date, and risk being charged if that date comes without full payment, why not just save up the money in the same increments over the same amount of time?  That way, if something comes up and you cannot buy the item when the time comes you can easily back out of the purchase.

When I told my wife I was preparing this piece for Frugal Dad she shared a layaway nightmare she had as a young teenager.  Guess jeans were all the rage, and while at the mall with a couple friends my wife put a pair on layaway along with an $8.00 “down payment” so the store would agree to hold the jeans.  The idea was that she would later return with her mom and get the jeans.  They never returned, and my wife was out $8.00.  It was a painful experience, but it must have cured her.  That was the last thing she ever put on layaway!


  1. If the alternative to layaway is to incur credit, layaway would be the smarter option. If for example you are buying winter coats for your children, by putting them on layaway you know exactly how much the coats cost and are assured that they will be there (in your kids’ sizes) when you need them. In an ideal world, everyone would save in advance for everything, but that’s not the reality, and this gives people an alternative to putting it on a credit card.

  2. Sweet! I completely agree. I do the same thing. In fact, NeoBudget ( — the budgeting software I have developed) handles this for you. You can create an “envelope” and adjust your income allocation to stick $25 from each paycheck into that envelope. You can watch the amount grow from paycheck to paycheck.

    My wife and I use this method in our own budget. We recently paid for maternity expenses this way. We started saving a while ago, and now that my wife is expecting, we have enough to cover all the expenses.

  3. I’ve never used layaway, but the impression I always had was that it is useful when there is both a sale and a limited quantity of the sale item. For example, a family sees Popular Xmas Gift advertised at 75% off midway through Nov. They don’t have the money ready to do their holiday shopping, but there’s no guarantee the product will be available later on or available at the heavy discount. Layaway in that case is a way of locking in a sale price.

  4. Yep, that was exactly how I used it. I remember getting a great deal on my prom dress and a leather jacket that way.

  5. @Never the Bride: Thanks for your comments. That is an interesting angle I had not thought of–locking in a great sale price makes sense, even if you have to use layaway. I suppose there are still fees to contend with, and the risk of not returning to buy the item (for one reason or another), but a great sale price probably makes it worth the risk.

  6. I think this is a bad move for consumers. In a time when the economy is poor and people need to save money and establish budgeting grounds, layover is a bad idea. Noe more people who can;t afford items will be buying. If you don’t have the cash, don’t buy.

  7. I used layaway a few times as a young teenager. I never got burned by it. I suppose that layaway coming back is a good thing on the whole. It’s certainly better than credit cards in terms of the potential to pile up debt and seriously wreck a family’s financial situation. And at least people will need to pay in cash when they do pay.

    Overall, I think that layaway was a good lesson for me as a young person: you have to pay for what you buy, and sometimes you don’t get everything you want instantly. It certainly served me better than having a credit card would have. I saved up my babysitting money to buy some clothes I really wanted. And having to wait to buy them meant that I had plenty of time to think about whether or not they were really worth the money I was saving up to pay for them.

  8. I agree with Never The Bride. Here is my example. My local bicycle store had a great end of season sale with the bike I wanted at 40% off. I did not have the cash to buy it in October. However, they agreed to keep the bike with 10% down and I have 6 months to pay the remaining 90%. There are no other fees. It was a good way for me to get a bicycle at a good price rather than waiting in the spring when I would have the money, but at a time when bicycles would not be on sale. I could have bought a bicycle used, but I like my local bicycle shop as they do free servicing if you buy it at their shop. Yes, there is a small risk that I won’t be able to buy the bike, but I will save over $400 off the regular price of the bicycle.

  9. I have a Christmas gift on layaway right now. I have the cash to pay for it in full, but I have nowhere in the house to hide it. This way, it stays out of the house for as long as possible. (There was no additional fee to put it on layaway, by the way).

  10. I agree with Lynn – and that’s how I have used Layaway – I’ll go ahead and pay for it in full, and have them store it for me on layaway until right before it is needed – saving me having to hide it away, especially in the case of a large item. Other than that, if I can’t pay cash for it, I still won’t buy it.

  11. Strange, my experience with layaway program fine print usually means that if the product is on some sort of great sale, it’s not allowed to be put on layaway. The store usually wants to move those items because they are either discontinued, the season has moved on and new season stock must be put out, or an overstock situation has occurred. It seems to be different elsewhere.

    I always thought that the layaway program was ok for people who really needed help to purchase a big ticket item or couldn’t save the money on their own. Unless you frequent that store, it’s kind of a pain to have to return on occasion to make installment payments for something you don’t even own yet. It also means that your funds are less liquid in the short term. Saving the money in an account you own means you could use it for an emergency if one should arise.

    Also, who knows if the item may have a better sale price later when you have saved up the cash? I’d rather have the cash in hand.

  12. I used Layaway for almost all my holiday shopping and did not incur any debt. Not only did Sears and KMart have layaway, but in the mall Champs Sports offered it and without any fees! Now that is being economically responsible.

  13. I do use layaway and have let my kids use layaway as a teaching experience. I think it is a good tool, if used in the right situations, which have all been highlighted! Another option, similar to layaway for stores that don’t offer layaway. Buy store gift cards at increments your comfortable with ($25 to $50 a week) Once you save up enough for that special item you want to purchase, then purchase it, or for some stores that have weekly specials, wait a few weeks to see if a version of that item goes on sale, you now have options. This works great for people who don’t trust themselves with a subaccount/sinking fund. Also, if you have self control issues and might use the cards for other items when you get in a pinch, then buy your card from a specialty store. Example: If your goal is to buy a 46 inch TV, then buy your card from a store that has great prices or specials on TV’s and only sells similar items, such as HH Gregg. Don’t buy Wal-Mart or Target cards if self-control is an issue, there are to many other options and you need to focus on the prize, not a pair of pants or grocery items!