URBN-owned Anthropology, Urban Outfitters and Free People stores join Walmart and Marshalls in launching layaway payment options
Buy now, pay later.
That’s what URBN-owned clothing stores Anthropologie, Free People and Urban Outfitters are encouraging shoppers to do with their new online layaway payment plan, which allows customers to buy clothing and pay in increments, rather than putting all the money down up front.
The retailers are using a service called Afterpay, a digital platform that offers interest-free payment plans for online purchases. Shoppers who want to pay with layaway at one of the participating clothing stores must have items totaling $35 to $1,000, and can select “Afterpay” as the form of payment at checkout. New users must register with Afterpay and input their payment info, like credit card or debit numbers.
The payments are broken down into four equal installments. The first payment is 25% of the purchase (items must add up to a minimum for $35) made the day you buy it online, and then three additional payments of the same amount will be automatically deducted from the remaining balance every two weeks from the selected payment method, which can also be through gift cards. But be sure to pay on time: Afterpay implements an $8 charge for a payment made after the due date, and another $8 dollars for every week after that. Late fees are capped at 25% of the total order value per order, however.
For some, layaway could be a better option than racking up credit card debt, experts say.
“Layaway plans are essentially an interest-free payment plan. Even if a fee is charged, it is likely a lower-cost option than financing, particularly with a high interest rate credit card,” Greg McBride, chief financial analyst at Bankrate.com, told Moneyish. “Layaway plans also facilitate locking in today’s purchase price, rather than risking inflation pushing the price higher before you can save up enough money for the purchase.”
Trendy clothing stores like Urban Outfitters and Anthropology are joining a slew e-commerce retailers who have introduced layaway payment plans in recent months. Boutique women’s clothing websites Hello Molly and CeloBella have also introduced layaway payment options using Afterpay, in addition to accessories site Quay sunglasses and men’s apparel shop Rhone.com.
They’re all bringing renewed interest to paying with layaway, which has existed as a payment option for T.J. Maxx, Walmart and Marshalls for years. Layaway became a common payment practice for consumers strapped for cash during the Depression, and had a resurgence in 2007 during the economic recession. It became increasingly popular with big-box stores like Sears and Walmart — particularly during the holiday season, when shoppers feel pressured to buy more, but perhaps can’t afford the hefty up-front costs of big-ticket gifts. But watch out for the fees often associated with layaway programs; Walmart, for example, charges $10 to put items on layaway, with a $50 shopping basket minimum. And there’s also typically a cancellation fee if you decide not to fulfill all of the payments.
Layaway at clothing stores today comes at a time when millennials seem to be using credit cards less frequently. Just one out of three young adults ages 24 to 31 carries plastic, according to a Bankrate.com survey. And 60% of millennials are interested in options beyond a traditional credit card to finance big purchases.
It’s likely because millennials are saddled with more student loan debt than any other generation: About 41% are struggling with student loan debt, according to a Pew report from 2015. And Americans in general are relying less and less on credit cards, a 2014 Gallup poll found.
But even if you can’t afford to pay for something in full, some financial experts say you should lay off of layaway.
“I generally advise people that if you can’t afford it, you can’t afford it. The more creative you get in trying to purchase something out of your reach, the more you risk creating a long-term debt problem for yourself,” said Rich Ramassini, senior vice president and director of sales and strategy at PNC Investments.
But he noted that, “There may be times when paying a deposit to secure an item for later purchase (layaway) can help. So here are some financial scenarios in which you might consider paying with layaway:
1. If the item is in high demand and short supply. “If the item will no longer be available when you can purchase it outright, then you may want to put it aside,” Ramassini suggested.
2. If a monthly payment plan helps you budget better. “If you have the discipline to set aside a little money each month or payday, this could allow you to buy something you otherwise couldn’t,” Ramassini said.
3. If the item you’re buying is a need, not a want. “If you use layaway to buy a 17th pair of shoes, you’re likely to use it to purchase pairs 18 and 19. Using layaway repeatedly can create bad habits that get you used to spending more than you make, which is not advisable,” warns Ramassini, adding that these same rules apply to 0% interest promotional rates on credit cards.
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