What is 'Layaway'

Layaway is a purchasing method in which a consumer places a deposit on an item to "lay it away" for later pick-up when they come back and pay the balance. Layaway also allows the customer to make smaller payments on the product until the purchase is paid in full. A layaway plan ensures the consumer will get their chosen merchandise once they pay for it in full.


Layaway works for consumers who have a limited amount of disposable income and are unable to make larger purchases all at once. There is sometimes a fee associated, since the seller must "lay" the item "away" in storage until the payments are completed. With little risk involved for the seller, layaway can be readily offered to those with bad credit. If the transaction is not completed, the item is returned to stock; the customer's money may be returned in whole, returned less a fee, or forfeited entirely. It also works to retailers' advantage by allowing them to offer products to lower-income customers. Layaway can also be used as a savings plan; because the customer has already made a commitment to purchase the product on layaway, he or she can not give in to temptation to spend the money elsewhere. 

History of Layaway

The advent of layaway came during the Great Depression of the 1930s. It fell out of favor during the 1980s, as the ubiquity of credit cards decreased its utility. Wal-Mart announced in September 2006 that it would discontinue layaway service in all its stores, citing the decrease in demand and a rise in cost of implementation. However, in September 2011, Wal-Mart resumed the service due to the new financial difficulties brought on by the The Great Recession and increased constraints on consumer credit. During the 2012 holiday season, many retailers were heavily advertising their layaway service and offering it for free (or effectively free) if all conditions were met. Kmart has continuously provided layaway in the United States for over 40 years. At one time, it the only major national discount retailer offering the service.

Online Layaway

Online layaway allows consumers to purchase items through scheduled deductions from a checking account. Online layaway simplifies layaway for both merchant and consumer by removing associated storage and bookkeeping costs. Layaways remain at the distribution center during the layaway period, instead of taking up valuable retail warehouse space. During the Christmas season, and it has been a tradition for some individuals to pay for others' layaway purchases as an act of random kindness.

  1. Consumer Credit

    Consumer credit is a debt that someone incurs for the purpose ...
  2. Cash Transaction

    A cash transaction is an immediate exchange of cash for the purchase ...
  3. Competitive Pricing

    Competitive pricing is the process of selecting strategic price ...
  4. Walmart Effect

    The Walmart Effect is a term used to refer to the economic impact ...
  5. Retail Lender

    A retail lender is a lender who lends money to individuals or ...
  6. Credit

    Credit is a contractual agreement in which a borrower receives ...
Related Articles
  1. Personal Finance

    Layaway Plans: Get The Goods Without Going Into Debt

    If using a layaway plan keeps you from having to use your credit card, it could be a smart move.
  2. Personal Finance

    5 Avoidable Shopping Mistakes

    By avoiding these common shopping mistakes, you may be able to save your hard-earned dollars and get more bang for your buck.
  3. Personal Finance

    Sneaky Strategies That Fuel Overspending

    Find out how to avoid six of the worst vender ploys this holiday shopping season.
  4. Personal Finance

    Surprising Credit Card Benefits

    If you didn't read the fine print, you could be missing out on these free credit card benefits.
  5. Personal Finance

    5 Money-Saving Shopping Tips

    Reducing the amount you spend is the easiest way to make your money grow.
  6. Personal Finance

    7 Tips For Avoiding Shipping Costs When Shopping Online

    Before clicking on that purchase, make sure you're getting the best deal possible.
  7. Personal Finance

    Walmart Pay vs. The Competition (WMT, AAPL)

    Although Walmart Pay has few competitors, it must improve its app or face pressure to accept better mobile payment services.
  8. Investing

    How Wal-Mart Is Beating Amazon At Its Own Game

    Wal-Mart is growing its e-commerce business faster than Amazon
  9. Personal Finance

    Shopping Online: Convenience, Bargains And A Few Scams

    Shopping from the comfort of your couch has major benefits - and some unpleasant side effects.
  10. Investing

    Wal-Mart vs. Target: Which One Is A Bigger Threat To Amazon? (AMZN, WMT)

    Walmart and Target both revealed multi-year plans to grow their businesses. Which of these two retailers is the biggest threat to Amazon?
  1. Who are Target's (TGT) main competitors?

    Take a look at the battle of discount retailers. How Target is different from its competitors such as Walmart and Costco. Read Answer >>
  2. Which economic factors most affect the demand for consumer goods?

    Understand how key economic factors such as inflation, unemployment, interest rates and consumer confidence affect the level ... Read Answer >>
Trading Center