Why Layaway Is Bad For Your Family’s Finances

by Hank Coleman

Why layaway is bad for your financesStores’ layaway programs are like state lotteries. They prey on the poorest and most uneducated in our society. Let me clue you in on a little secret. Layaway is great for stores, but it is typically a losing proposition for us consumers. Here’s why layaway is bad and you should consider staying away from layaway programs.

Layaway Is Bad Because You Spend Too Much

When you buy something on layaway, the cost of your purchase is divided into several payments. The full amount does not need to be paid for at the time of purchase. This can lead to overspending. It is easy to buy more than you intended when you do not have to pay for those purchases right then. Layaways have a way of not keeping us honest with ourselves. It is all too often easier for undisciplined consumers to spend more than they can afford when they use a layaway program from a store.

Layaway Has Fees Like A Credit Card

You cannot escape fees whether you pay for your purchases all at once with a credit card or over time through a store’s layaway program. Fees added to the total cost of the items that you put on layaway. It is akin to the monthly interest that you will typically see on a credit card purchase as well. Here is a scary example. Lets suppose you went into a store last month (October) to layaway a $100 toy for Christmas. You put a down payment of $10 on your item and pay a $5 service fee for your layaway. If you pay off your layaway, what you actually did was pay the equivalent to $5 in interest for a $90 loan for two months. That would equate to a 44% annual interest rate if you calculated it at an annual rate.

Backing Out Of A Layaway Will Cost You A Fee

When you buy something on layaway, you can find yourself still making impulse purchases. While you typically have the option of backing out of your purchases even when you buy them on layaway, most stores will require that you pay a fee to do so which will increase your total holiday spending if you are not careful. Of course, avoiding an increase in spending during the holidays is the whole reason that you are using layaway in most cases.

You Could Run Into Problems If You Don’t Pay

Depending on the store and their policies, you could potentially run into trouble if you miss a payment on your items that are laid away. If you fail to make the payments on time, the money that you have already spent on your items placed on layaway could be lost. Some store may reimburse you for the money spent with store credit or with a gift card, but your item could be gone that you tried to reserve.

There Is A Better Way Than Using Layaway

There is a better way to save for your Christmas or holiday presents though instead of relying on layaway programs. It is the tried and true method of simply saving for your holiday spending ahead of time. You should start saving for next year’s Christmas presents in January. Like baseball managers who say that the MLB World Series is won in May and June and not October, your holiday savings are not something you should start thinking about in the fall. The earlier that you start saving will help you avoid having to use programs such as layaway and credit cards that drain your bank account one fee at a time.

Paying upfront for your total cost is always the best way to go. Layaway programs are everywhere. You can’t enter a national retail store this holiday season without being inundated with propositions for layaway programs. The biggest stores in America have been hitting their programs hard for months now. But, there is a better way to spend your hard earned money next holiday season. Layaway is not the answer.

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About Hank Coleman

Hank Coleman is the founder of Money Q&A, an Iraq combat veteran, a Dr. Pepper addict, and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications. Hank holds a Master’s Degree in Finance and is currently pursuing his Certified Financial Planner credentials. Email him directly at Hank[at]MoneyQandA.com.


Hank Coleman has written 531 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.


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