Even with the widest array of alternative payment methods in 2025 that customers have ever had at their fingertips, many people still use layaway. That is at least in part because of layaway’s money-saving advantage over interest-accruing credit cards and the greater financial flexibility that comes with that choice for people on limited budgets.
Since its advent during the Great Depression in the 1930s, layaway trends in retail have proven their many significant benefits to customers and their sustainability as a revenue generator for retailers. But, in an age of e-commerce and digital wallets bulging with credit cards, is layaway still a thing? Are there still stores that offer layaway? If so, how does layaway work online?
What is Layaway?
Layaway is an alternative financing method that enables shoppers to make a partial payment upfront, followed by scheduled payments to clear the remaining balance in full before receiving the item. Essentially, it is a payment plan offered by many retail and discount stores for shoppers in-store through POS systems and online. The customer places a deposit with the seller, secures an arrangement to pay the balance of the purchase cost in full on the agreed date, and vouches to collect the item.
How Does Layaway Work?
One of the most appealing aspects of layaway is that it’s so easy to use online. Here are the simple steps of the layaway process for e-commerce:
- The customer chooses the product they want to buy using an online layaway and presents the item at the retailer’s designated layaway processing location.
- The store confirms that the item is eligible for layaway under the store’s terms and conditions.
- The customer then submits an electronic payment through the retailer’s website, choosing one of those payment schedules to pay the remaining balance of the purchase cost (usually weekly, biweekly, bimonthly, or monthly terms).
- The customer pays the incremental payments until the balance is paid in full, plus any layaway fees or other costs as agreed, and picks up the item(s) from the store. Or, online, the customer either picks up the item at a store pickup location, if provided or waits for delivery.
Offline layaway payments work like this:
The customer selects an eligible item in-store, usually a higher-value product like furniture, electronics, or seasonal items. The item is then reserved for the customer.
Using the POS system, the cashier or sales associate inputs the product into the system, where the item is marked as "on layaway" and removed from regular inventory. This prevents it from being sold to other customers.
Layaway eligibility rules are set in the POS, meaning only certain items are available for layaway, and this is enforced through the system.
Read More: Bi-weekly vs. Bi-monthly vs. Semi-monthly Payments
How to Set Up Layaway Online
Setting up a layaway option for your online store is an excellent way to offer customers flexible, interest-free payment plans. This method allows shoppers to reserve items and pay for them over time. If you're a merchant or customer curious about setting up a layaway plan, here’s how to do it efficiently, while understanding the necessary terms and policies.
1. Define Layaway Eligibility Rules
Before offering layaway online, it's essential to define which products are eligible for the service. Layaway eligibility rules vary by retailer but typically include high-ticket items, seasonal products, or items in high demand. For example, furniture or electronics might be eligible for layaway, while clearance or sale items might be excluded.
2. Set the Layaway Deposit Amount
Once a customer selects an eligible product, they need to make an initial payment to secure the item. This initial payment is called the layaway deposit amount and typically ranges from 10% to 25% of the total item cost. The layaway deposit amount serves as a commitment and ensures that the item will be reserved until the final payment is made.
3. Outline the Payment Plan and Minimum Payment Requirements
After the deposit is made, the customer will need to adhere to a payment schedule. It’s important to clearly communicate the minimum payment for layaway — the smallest amount due per installment. Most stores will offer flexible payment plans, such as weekly, biweekly, or monthly payments. The key here is to create interest-free payment plans that allow customers to pay without added fees, making the process attractive.
4. Clarify the Layaway Service Fee Breakdown
Some retailers charge a service fee to manage the layaway plan. This could cover storage, handling, or administrative costs. It’s crucial to provide a layaway service fee breakdown so customers understand any additional charges. These fees should be transparent and communicated upfront, as part of the overall layaway agreement.
5. Explain Layaway Cancellation Terms and Refund Policies
Life happens, and sometimes customers may need to cancel their layaway plan. Layaway cancellation terms should be clearly outlined so customers know their rights. For example, if a customer cancels, are they entitled to a refund of the deposit? Or is there a cancellation fee? Make sure to include whether the layaway refund policy allows customers to get a partial or full refund, and under what conditions this applies.
6. Final Payment and Item Release
Once the total cost is paid off, including any deposits and installment payments, the item will be ready for shipment or pickup. Be sure to communicate the final payment date clearly to customers and confirm that the item will only be released after full payment is received.
7. Monitor Payments and Send Reminders
An essential aspect of offering layaway online is ensuring customers keep track of their payments. Consider integrating a system that automatically sends payment reminders. This ensures that payments are on time and helps prevent missed payments or cancellations.
Layaway vs. Credit cards – Difference for E-commerce
How does layaway compare overall with credit cards for merchants managing payment transactions, inventory transfers, and accounting? For e-commerce stores and retailers, both layaway and credit cards offer different advantages and cater to different needs.
Layaway Meaning
Layaway offers customers a way to reserve items with a series of payments before receiving the product. This can encourage sales by catering to customers who may not have immediate funds. However, it ties up inventory until fully paid, potentially affecting cash flow and limiting product availability. It also involves administrative overhead, monitoring payments, and managing cancellations.
Credit Meaning
Credit allows customers to purchase items immediately and pay for them later, often with interest. This can boost sales by removing financial barriers and increasing immediate revenue. But it also poses risks like high cart abandonment due to financial obligations. Credit transactions also often involve processing fees and the possibility of chargebacks, affecting your profitability.
| Aspect | Layaway | Credit Cards |
|---|---|---|
| Payment Method | Pay over time in installments | Pay upfront or within a billing cycle |
| Approval Process | Often no credit check required | Requires credit check and approval |
| Interest Rates | Typically no interest charged | Interest charged on unpaid balances |
| Fees | May have layaway fees or service charges | Annual fees, late payment fees, etc. |
| Spending Limits | Usually no spending limits | Limited by credit limit |
| Impulse Buying | Discourages impulse purchases | Encourages impulse purchases |
| Budget Control | Helps customers manage budget over time | Can lead to overspending if not managed well |
| Customer Base | Attracts customers with limited credit | Appeals to customers with established credit |
| Inventory Holding | Retailer holds inventory until paid in full | Immediate inventory release upon purchase |
| Customer Loyalty | Builds loyalty through commitment to purchase, lowers financial anxiety and supports customer trust | Encourages return purchases through rewards |
| Flexibility | Less flexible as items are reserved until paid | More flexible with immediate product access |
Key takeaways: Layaway can be a great option for customers who may lack access to credit bank accounts, have a negative credit history, prefer de-risked shopping, or like to pay for purchases over time without charged interest. Credit cards offer immediate access to products, making them suitable for customers who own rewards credit cards, have a good payment history, and are ready to handle higher interest rates.
Layaway Benefits for Customers and Merchants
Why do stores still do layaway? Layaway represents a substantial opportunity for American buyers and sellers. It assures a win-win as the parties on both sides of the layaway transaction significantly benefit. Here are some of the important ways layaway helps retailers and shoppers:
Layaway Benefits for Retailers
- Increases revenues – Offering a layaway option enables you to sell higher daily volumes of higher-ticket items.
- Larger Average Ticket Size – Providing layaway enables and encourages customers to add one or more items to their total purchases that they would otherwise delay buying, which increases the total receipt amount.
- Increases Customer Lifetime Value – Layaway serves to financially strengthen the customer base by helping long-term customers save on credit card debt balances and rapidly compounding interest.
- Gives You a Competitive Edge – Layaway has proven to be a popular program over generations of consumer shopping. Customers are attracted to stores offering the option due to its financial and lifestyle benefits.
- Improves Customer Satisfaction Rates – Delivering the above-listed customer benefits naturally adds value to shoppers’ purchases and their experience with a store.
- Increased Profit Margin – Of course, creating conditions that increase the Rate of Sale and total revenues for a period can be expected to contribute to a healthy profit margin.
Layaway Benefits for Customers
- Improve Consumers’ Lives – Using layaway makes it possible for many people to buy higher-ticket items without waiting until they save enough to make the purchase only to find the product is no longer available at the desired price.
- Provides Financial Help – Layaway grants people buying on a tight budget the convenience of avoiding the difficulty in trying to save up the amount of the product cost at home.
- Avoid Adding Debt – Layaway offers an excellent alternative for consumers to avoid accumulating more credit card debt when making purchases and delaying payments.
- Zero Interest Cost – Layaway is one of the interest-free shopping options, so there is no interest charged on goods bought through layaway programs. It’s not a debt, and there are no credit score consequences.
- No Credit Check Shopping – Layaway purchases do not require the inconvenient, time-consuming application and credit card issuer approval process.
Layaway Common Challenge and Solution
Layaway is a comparatively simple concept for a very manageable customer benefit program. However, like any system of financial transactions, it requires you to take appropriate measures to provide the clearest possible communication. In layaway transactions, the most common issues arise from the confusion about refund and cancelation policies.
As a merchant, you should have a clear and concise written refund policy, issued to all layaway customers at the time of the deposit transaction. The Federal Trade Commission provides suggested language for a typical layaway refund policy declaration through the link above.
Another disclosure that should be provided to all customers using a layaway plan is the company’s cancelation policy. It should explain, for example, the forfeiture of the deposit paid, store credit, etc., if applicable. See the FTC’s suggested language for this type of notice at the link.
Online Layaway Best Practices
There is abundant good advice published on how to run a layaway system smoothly. E-commerce industry best practices for layaway processes and policies include everything you may encounter managing a layaway program. Some examples include:
- Create separate transactions for regular purchases and layaway purchases that a customer is making at the same time.
- Set automatic payment restrictions for certain payment methods or sums eligible for layaways.
- Support as many popular payment processors as possible.
Read More: The Most Popular US Payment Processors
Adherence to layaway best practices includes providing all the following information on the sales receipt or an accompanying document:
- A description of the item entering layaway storage.
- The total purchase price, including layaway service charges or other applicable charges.
- The dates that payments are due and the deadline for the final payment.
- The minimum payment amount required on the agreed date.
- The date that items are to be ordered if they are not in stock.
- The complete refund and cancelation policy for layaway purchases.
- An explanation of how refund amounts are calculated.
The FTC publishes a set of strongly recommended layaway practices emphasizing the need to ensure optimal clarity of payment terms, fees, cancelation charges, and refund policies.
What Layaway Stores Are There?
Major retailers are well aware of the benefits to their customers and their businesses from offering layaway programs as alternatives to credit card use. Target, Walmart, Pottery Barn, and many other major chain stores offer layaways.
Some provide hybrid options that extend to online shopping, including click-and-collect, which allows customers to pay online and choose home delivery or in-store pickup. A few examples of successful stores with layaway systems include:
Kmart
The Kmart big box store chain offers a vast selection of housewares, electronics, sporting goods, clothing, shoes, jewelry, toys, hardware, and other products. Many types of items can be placed on layaway at Kmart in a store or online. The company offers a choice of an 8-week term for a $5 service fee with a $10 cancelation fee or a 12-week term for a $5 fee with a $20 cancelation fee.
Sears
The Sears layaway option is available in the stores or online. For purchases under $300, the layaway plan is 8 weeks and it’s 12 weeks for amounts above that threshold. There’s a 10% deposit, plus a $5 service for the 8-week term and a $10 fee for 12 weeks. Sears offers click-and-collect for online customers, allowing them to choose any store to pick up their layaway purchase or receive home delivery after the balance is paid in full.
Big Lots
Across the nearly 1,400 Big Lots stores nationwide customers can use the layaway program to purchase a wide variety of products from its seemingly endless selection. Discounted overstock merchandise, from recreational items to major appliances are usually eligible for layaway, though some Big Lots locations only offer layaway for furniture. There is no service fee, but there is a 10% deposit and a 5% cancelation fee at some branches, both of which charges can be quite high depending on the item price.
BNPL: The Future of Layaway?
Mega-retailer Walmart and other successful big box store chains have implemented Buy Now Pay Later (BNPL) programs that enable customers to take their purchased items home with agreements to pay later. Many media sources are calling BNPL “the new layaway,” new age layaway,” “this generation’s layaway,” etc. But, those catchphrases are misleading.
According to Experian, while BNPL services seem similar to traditional layaway, they come with credit score impact of BNPL. Unlike layaway, where the consumer doesn’t take the item until fully paid, BNPL operates like short-term loans and requires approval based on creditworthiness. This means there is a risk of buy now pay later risk, including late fees for missed payments and potential damage to the customer’s credit rating. Furthermore, due to the very short-term nature of BNPL loans, they offer minimal potential to improve credit scores compared to a more structured installment plan like layaway, where payments are spread over a longer period without credit involvement.
BNPL services are being positioned as a close and preferable option to layaway. Yet this model of delaying payment constitutes the establishment of credit accounts and does not resemble layaway in benefits or risks to consumers. US retailers are well aware that over 25% of US consumers are already struggling with credit card debt interest payments.
That’s why it appears that BNPLs are unlikely to replace layaway as an equal and more practical alternative. Layaway can be expected to remain in use for as long as a high percentage of consumers recognize the financial and lifestyle benefits they can receive from using it.
Top BNPL Providers
Klarna
Klarna is one of the leading BNPL providers globally, offering customers flexible payment options across a wide range of retailers. With Klarna, shoppers can split their purchases into 4 equal interest-free payments made every two weeks or opt for longer-term financing options. Klarna also allows customers to pay the full amount within 30 days without any interest or fees, as long as the payment is made on time. However, late payments can result in fees and impact the customer’s credit score. Klarna’s wide integration with online stores and ease of use has made it a popular choice for many.
Afterpay
Afterpay allows customers to split their purchases into 4 equal payments, due every two weeks. Like Klarna, Afterpay is known for its no-interest policy as long as payments are made on time. Afterpay charges late fees for missed payments, and these can increase over time. While Afterpay doesn’t typically run credit checks for approval, late or missed payments can affect your credit score through third-party collections. Afterpay is highly integrated with retailers, particularly in fashion and lifestyle categories.
Affirm
Affirm offers a range of BNPL options, from short-term 0% interest payments to longer-term loans with fixed interest rates. Unlike Klarna and Afterpay, Affirm typically offers payment terms from 3 to 36 months, with interest rates ranging from 0% to 30% APR, depending on the customer's credit. Affirm conducts a soft credit check when applying for financing, and payments can be reported to credit bureaus, which can help or harm your credit score. Affirm is available for both online and in-store purchases with numerous retailers.
Should Your E-commerce Store Start Offering a Layaway Plan?
A layaway department is a relatively inexpensive customer benefit to implement. That defines it as a great opportunity for retailers.
All you need to start offering online layaways is to make sure your e-commerce platform supports popular US payment processors (for instance, Stripe in Magento), and integrate basic digital checkout processes that track layaway transactions. Introducing a recurring payment solution is an extra step that can protect your business from late payers and your customers – from penalty fees.
Calculate an affordable budget for the online layaway project, obtain funding (if necessary), and create the framework. Then, roll out your new layaway system to delight your customers and other stakeholders in your store's success. Beyond that, continue to improve your layaway service program over time to maximize its convenience, efficiency, and many benefits to your customers and business.
