Should You Use Layaway for Black Friday Shopping?

As you shop Black Friday deals, you may notice certain retailers offering layaway as a payment option. Layaway allows you to pay for an item over time, which can make the purchase easier to manage alongside other expenses in your budget. However, you won’t get the item until it’s completely paid off, and you may be responsible for fees.

Here’s what to know about layaway and whether this option is the right choice for your holiday purchases.

“Layaway is a really cool old-school approach to buying something that you can’t pay for all at once,” says Lisa Gill, a Consumer Reports investigative reporter who covers money topics.

Layaway is a payment plan where the buyer makes a down payment on an item — either a set dollar amount or a percentage of the price — and pays the remaining amount in installments or a lump sum. The seller sets the product aside, and the buyer receives it once they’ve paid the full amount.

Layaway and buy now, pay later, or BNPL, plans from companies like Afterpay and Klarna both give shoppers a way to break up the cost of a purchase into smaller payments. But these plans have some key differences.

Timing: With layaway, the retailer holds the item until you’ve finished paying it off. With BNPL, you get that item immediately. As far as how long you make payments, layaway timelines usually range from a few weeks to a few months. BNPL payment plans typically take six to eight weeks over a span of four payments, Gill says.

Payment types: Layaway payments are typically made with cash, check or credit card, depending on the retailer’s policy. BNPL payments are usually made with credit cards, debit cards or bank accounts.

Missed payments and credit impact: Neither on-time nor late layaway payments are reported to the credit bureaus. The retailer’s collateral for missed payments is your purchase that it’s holding.

BNPL is a no- or low-interest loan that requires taking on debt and possibly getting a credit check. Late BNPL payments could be reported to the credit bureaus and result in fees. The debt could be sent to a collection account, which would hurt your credit score.

While layaway doesn’t lower the total cost of your purchase, it can make it more manageable by dividing it into smaller payments. Layaway also guarantees that the product doesn’t go out of stock before you have enough money to buy it.

But there are drawbacks, too. While a layaway plan won’t harm the user’s credit, the unreported on-time payments won’t help it, either. And shoppers may have to pay nonrefundable deposits and other costs, such as storage or cancellation fees. Depending on the plan terms, you could end up paying more for an item using layaway than if you had bought it outright.

In many cases, “if a consumer cannot make the payments, they forfeit the money and the item they put on layaway,” Michelle Smoley, director of personal and college finance at Bright Horizons College Coach, said in an email. Still, that’s a better outcome than dealing with a debt collector.

Layaway isn’t as common as it once was. “Layaway plans were much more prevalent before access to credit cards was expanded and during a time when more shoppers shopped for items in person,” Smoley said.

“Most big-box department stores and retailers no longer offer layaway plans,” Smoley said, including Walmart and Amazon, which ended its Amazon Layaway service in October.

You may be more likely to find layaway at smaller businesses, such as vintage stores and pawn shops, Gill says. But some bigger companies still provide the option.

A few of the retailers offering layaway plans at the time of this writing include:

• Hallmark Gold Crown stores.

Retailers may only offer layaway on select items or at certain locations, so make sure to read their policies carefully.

If you’re on a tight budget and don’t have a credit card or good credit, layaway can be a useful tool. This payment method doesn’t require you to take on debt and won’t directly put your credit at risk. It’s also a good way to lock in an item before someone else buys it during the busy shopping season.

However, keeping to a layaway payment schedule means you may not get the product in time for the holidays. Sticking to a budget can be tough, too. “It can be easy to overextend and spend with layaway plans, so consumers should have a solid repayment plan before they sign on the dotted line,” Smoley said.

Will you have enough money to cover the payments if an unexpected expense pops up? Ask yourself how important the purchase is, and think through all of your options. There may be other ways to buy an item that don’t require waiting as long to get it or spending as much money.

Gill suggests exploring retailers’ secondhand offerings, such as open-box or refurbished items. “There’s so much stuff out there that has been fixed up and cleaned up,” she says. Stores like Best Buy, Wayfair and GoodBuy Gear offer a variety of secondhand items at a discount.

You might also consider saving money for the purchase and buying it in one go. Setting aside money in a savings account until you’ve reached the target amount will spare you extra fees and uncertainty.