Amazon Layaway: A New Perk of Amazon Prime

If you’re old enough to have parents who bought items on layaway (or did it yourself), you’ll understand Amazon’s latest perk for Amazon Prime: Amazon Layaway.

It’s available now, mostly pitched to back-to-school shopping, but many remember layaway generally as a department store holiday staple in the decades following World War II. The idea was – and is – this: You’d reserve big purchases like Christmas toys for the kids well ahead of the big day, and pay the store’s layaway department a portion of the final tab every few weeks until the item was paid for and ready to be retrieved, wrapped and delivered to eager children or other recipients.

Amazon Layaway works, virtually, in a similar fashion. Curiously, it’s the inverse of the intensely popular (and significantly more risky) buy now, pay later programs. Here, you pay now, get later.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

Amazon says it has thousands of selected items ready for Amazon Layaway, and there’s no credit check, no interest charged and there are no cancellation fees. Items are clearly marked with a button that says “Reserve with Layaway.” Layaway customers pay 20% of the item’s total cost at initial checkout. The item is then reserved and the price is locked in.

Next steps include making equal payments every two weeks for up to eight weeks until the item or items are paid in full. A quicker payoff means a faster delivery. Not every item Amazon sells is available for layaway. Amazon advises if you want the items to arrive in time for December holidays to make your purchases by Oct. 23.

But is layaway a sound money-saving move?

Unlike buying via a credit card, layaway programs typically don’t charge interest – though some stores in the past charged small “layaway fees” to store the items – and aren’t considered a form of debt (thus, no need for a credit check).

Amazon isn’t charging any fees above the costs of the items, but should other retailers resuscitate layaway, consider whether they charge layaway fees (a decade ago, Best Buy charged 5% of the total layaway price and retailers including Burlington Coat Factory, Marshalls and T.J. Maxx charged a $5 non refundable layaway fee).

Other concerns include:

• Using layaway may cost you. If you lock in the price of a product and put it on layaway, you will miss out if and when the item goes on sale for a lower price, perhaps on Black Friday or during the busy holiday shopping season. Amazon confirms its prices are locked in at time of purchase and that’s the final price for layaway items, even if the product goes on sale. But, in these inflationary times, there’s also the upside that you’ve locked in a given price that could also go up.
• You might pay more to cancel. Amazon Layaway isn’t charging a cancellation fee. Other retailers have in years past and still might if they revive layaway.
• You might not be able to afford that layaway. On the face of it, layaway seems a more prudent option – and it is certainly better than buying something – or many things – that end up putting you in debt. And yet, the idea of taking an expensive item and breaking it up into more manageable payment chunks can end up disguising the sum cost. In short, can you really afford it? And if you face a cancellation fee, that’s bad money on top of bad money.