In Depth

Getting Away With Layaway

Layaway: It’s not just for money-conscious holiday shoppers anymore.

While layaway programs traditionally reach their peak of popularity during the busy (and expensive) holiday shopping season, there is a new rising star in the market: the layaway vacation. So, just as all the presents have been unwrapped under the tree, it’s time for families to start planning for their summer vacation, and that very well could mean a layaway plan.

As U.S. News & World Report explains, the popularity of the practice of paying off an otherwise unaffordable product in advance installments has — perhaps unsurprisingly — ebbed and flowed with the strength of the economy over the last two centuries. The Great Depression brought about its first major surge in layaway purchasing in the U.S. in the 1920s and 1930s; layaway emerged again as a popular option for vets returning home to families after World War II. As credit cards came into vogue in the 1950s and 60s, layaway was usurped as Americans opted for the convenience of credit, but it recently made a comeback during the recession of 2007–2009.

Many big box retailers offer layaway programs in one form or another. Popular programs include Kmart, Walmart (which discontinued its layaway program in 2006, only to bring it back in 2011), Sears (which similarly did away with layaway on all items except fine jewelry in the 1980s but has since resurrected the program) and Toys"R"Us.

It’s clear why consumers would be attracted to such a program: It makes out-of-reach, high-priced items accessible to more shoppers, without the added interest of a credit card. But what are the advantages to retailers? Why not just let customers use credit and put the burden of collecting on those debts on the card-issuing banks? Layaway creates a tempting connection between the store and the consumer and a driving reason to return to the store repeatedly over a period of time to make payments.

“Every time you come in to pay, [retailers] have the opportunity to talk to you, market to you, upsell you,” Marshal Cohen, chief industry analyst at The NPD Group, recently commented to MarketWatch. “It’s the opportunity to create the ultimate loyal consumer.”

In fact, many stores — like Kmart — even offer incentives to entice shoppers to opt in to their layaway programs. At Kmart, according to MarketWatch, purchasing items on layaway doesn’t require a down payment, is available on almost every item in the store and even comes with a $10 discount when customers spend $50 or more.

That kind of success with layaway plans has compelled some big retailers to expand their horizons beyond the store.

In 2012, Sears started offering its Sears Vacations layaway program, which gives travelers access to 3,000 cruises and 5,000 land-based packages, with trip payment plans starting at $49 per month.

Disney has also gotten in on the action, introducing the Disney Vacation Account just over a year ago. “They [guests] tell us that they love being able to set a savings goal, make automated contributions and get the whole family excited as their vacation approaches,” a Disney spokesperson told ABC News. With the Disney program, users can start an account as far as five years in advance of their planned vacation date and set a budget to make automatic contributions monthly. As a perk, guests earn a $20 Disney Gift Card for every $1,000 spent (up to $500), incentivizing travelers to consider using its program instead of paying for vacations with credit cards.

While these programs offer advantages to consumers who can’t necessarily qualify for credit cards, there are some potential drawbacks. The Sears Vacations plan, for example, charges a $9 monthly fee (the company is careful to point out that it’s not interest) on all of its packages. For a vacation costing $399, for example, a $9 monthly payment would come out to a whopping 27 percent annual APR, according to a report by SmarterTravel.

While layaway has proved to have lasting power when it comes to retailers, it remains to be seen if travelers will bite on the opportunity to book a vacation now and pay over time. With competing travel reward programs, competitive credit card rates and incentive programs from organizations like AAA and AARP, it may be a hard sell — no matter how much time consumers can take to buy it.



The September 2020 Leveraging The Digital Banking Shift Study, PYMNTS examines consumers’ growing use of online and mobile tools to open and manage accounts as well as the factors that are paramount in building and maintaining trust in the current economic environment. The report is based on a survey of nearly 2,200 account-holding U.S. consumers.