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Is Layaway Good or Bad? We've Got Your Answer.

“Is it okay to shop layaway?”

That’s a great question. And it’s one Dave Ramsey hears a lot around the holidays. The short answer is this: it’s always better to save up and pay cash, but a no-fee layaway plan is better than an entire Christmas put on credit.

Interest-free payments are a big reason layaway has enjoyed a comeback in recent years. The other reason? Retailers have figured out that by bringing back Depression-era installment plans, they can “help” their budget-strapped customers ease into expensive purchases. It’s an obvious win for the store, but not necessarily for the consumer.

Here’s the good and the bad of layaway:

First, the Good:

Forced Savings
Unlike credit cards, layaway forces you to pay off your son’s brand new game system before you giftwrap it and put it under the tree. So it’s making you save, which is a good thing. But layaway doesn’t ensure you’ll actually budget that extra $100 or $200 a month—you’ve got to do that for yourself.

No Interest
Layaway doesn’t accrue interest. So you won’t be paying for Fido’s dog bed or Grandma’s gold earrings six months from now. That’s great. But you can still go into debt if you let your credit card make those weekly installments for you! Don’t miss the whole point of using layaway by swiping plastic.

That Sale Price
“But it’s on sale!” We get it. You want to lock in a good deal before it’s gone. And that makes perfect sense if you’ve had your eye on that electric scooter for weeks. But don’t get wonderstruck by all those percent signs and dive into a shopping frenzy. If your family doesn’t really want or need it, don’t buy it right now. Save up for a bit and pay cash instead.

Now, the Bad:

You’re Stuck
With layaway, you’re tethered to whatever you’ve placed on hold. But what if you find that same laptop for half price elsewhere? Or what if you picked out the wrong Barbie dream house? Or what if that stand-alone kitchen mixer gets terrible reviews? Cancellations mean cancellation fees. So either pay up, or live with it.

About Those Fees
Many layaway programs charge an initial service fee of $5 or $10 to simply open your account. And if you don’t meet the 60- or 90-day payoff period, the store will also charge you a restocking fee just to reshelf the items. So even if a chain advertises free layaway, read the fine print—it may not be free after all.

Busted Budget
Retailers know it’s much easier to sell high-dollar items when the price tag comes in bite-size chunks. That’s why they make it easy to focus on the weekly payments instead of the overall purchase price. But first ask yourself: Can I truly afford the item? And does it fit into my overall holiday budget? Take some time to look at the big picture before you buy.

Have no clue if it fits into your budget? Find out now with the EveryDollar budget tool.

A Better Way to Lay Away

Instead of making payments to a store each month, why not save up and shop with cash this season? It’s as simple as creating a detailed holiday budget and dividing that amount by the number of paychecks left until Christmas.

Because when you walk into a store with a pocket full of cash, you’ll have the freedom to change your mind and make better decisions. And let’s face it, that eight-bagel toaster may not seem as cool come December.

Looking for a helpful gift that easily fits into your budget? Check out our books, bundles and tools.

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Ramsey Solutions

About the author


Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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