Using a layaway plan can bring huge benefits to the customers. However, it also has some drawbacks that you need to consider:
Customers don’t have to pay interest on things purchased through a layaway program. That makes layaway a more cost-effective choice than using a credit card, which charges customers interest rates ranging from 15 to 25%, and sometimes even higher. Layaway services only charge a small flat-rate service fee to help retailers cover storage costs. According to a survey by Splitit in July 2018, 35% of US buyers would be more likely to buy online if they could make interest-free installment payments on digital goods. In addition, almost 50% of participants consider free interest the most important factor when choosing an installment plan following the same survey.
Layaway plans, unlike other types of finance, do not have strict acceptance criteria. In contrast to credit cards, retailers do not undertake credit checks. Customers with bad credit or no credit history can participate in these programs because they only ask for identification and a deposit for the goods.
Some retailers offer layaway for online purchases. So you don’t need to wait in a long line or go to several locations to search for the products. Consumers can purchase things through online layaway schemes by making scheduled deductions from their checking accounts and later pick up in-store if they feel convenient. By removing associated storage and bookkeeping costs, online layaway makes layaway easier for both businesses and customers. Rather than taking up valuable retail warehouse space, layaway items are kept at the distribution center for the duration of the layaway term.
Layaway programs offer free interest. However, most retailers still charge some fees besides the deposit including service fees, cancellation fees, or restocking fees. It can be from 5$ to 100$ depending on each store. Therefore, layaway is not a suitable option for a small purchase. In addition, if you cancel the layaway agreement, you may lose all those paid fees
Customers must make periodic payments within the agreed-upon time frame to participate in layaway services. Customers who break these terms risk losing their stuff and being charged a cancellation fee.
If you do not complete your layaway agreement, you will not lose the money you paid, but you will have to pay additional fees. For unpaid or canceled layaway agreements, most businesses charge a cancellation fee. Besides, some stores charge an additional restocking fee to put the items back on the shelf.
Not available for every purchase
Many stores just limit the items they have on the layaway programs. Besides, layaway is also not encouraged or applied to items with small value because of all added fees.