Buy Now, Pay Later vs Layaway: Which Will Be the Consumer’s Saving Grace This Holiday Season?

A figure pushes cart with a sign that reads "Buy Now" and a $20 bill behind the figure that reads "Pay Later".

The holiday season is upon us… and so is inflation. According to the Labor Department, the consumer price index (CPI) rose to 0.01% bringing the total inflation rate to 8.26% as of August 2022. Many consumers have had to rethink their finances as prices for necessities such as groceries and clothing continue to rise. The same goes for holiday spending. This time last year holiday spending increased to 15%, while holiday spending this year is projected to increase between 4% to 6% according to Deloitte.

So, the question is, how are consumers planning on purchasing gifts this holiday season? Of course, saving money in general would be the obvious answer, but some consumers may not have that choice. Many are living paycheck to paycheck and still must strategize on how they’re going to buy gifts for their loved ones without going into debt. Other ways people plan on buying gifts this holiday season is by using gift cards and reward incentives. But what about buy now, pay later apps (BNPL) and layaway? We will explore the benefits of both, and which one may be the better option when it comes to securing the holiday bag.

Buy Now, Pay Later 

Buy Now, Pay Later (BNPL) apps have been very popular among Millennials and Gen Z. In an article by Insider Intelligence, around 55.1% of Gen Z shoppers will try BNPL service at least once. When using BNPL platforms, clothing and electronics seem to be the more popular items to purchase. BNPL apps are becoming more popular due to many factors such as they offer credit flexibility, are often interest-free, and have easy approval ratings. BNPL allows the consumer to take their purchase home and pay for their purchase, over time, through scheduled weekly or monthly installments. Apps like Klarna, Zip, and Afterpay take only minutes to sign up and get approved. Unlike a credit card no background check or prior credit is required, making it very easy for consumers who may not have great credit or no credit at all to get approved. The first payment will be made at checkout where a scheduled payment plan will then be setup automatically.

Although BNPL services do not charge interests fees, some apps may charge fees for late or missed payments. They can charge anywhere between $5 – $10 in late fees, which may impact the spending limit. BNPL apps may also encourage more spending. Because of the convenience of BNPL services, consumers feel the need to buy items that they may not necessarily need. Ultimately, causing some consumers to spend over their means or falter payments altogether.


Layaway is the OG when it comes to saving big, especially during the holidays. Instead of taking the items and paying for them later, layaway plans allow the consumer to place the items on hold with the retailer and pay for them in small installments. Once the purchase has been paid in full the consumer can then take their items. Layaway plans were created after the Great Depression allowing the consumer a way to shop for necessities and pay for them in small installments rather than one large payment. Layaway has somewhat faded away throughout the years due to the invention of credit cards but made a comeback during the Great Recession. Now retailers who offer layaway plans may have to compete with BNPL apps or may choose to join the band wagon.

Last year, Walmart made the decision to eliminate layaway all together and opt for BNPL app Affirm. Whereas Amazon just introduced their new online layaway plan in August, just in time for the holidays and amid inflation. Layaway plans require a percentage down of the total purchase price and can be paid down in a period of weeks or months. They are like BNPL apps when it comes to no interest fees, no credit checks, and no threat to your credit score but fees may be involved if the consumer chooses to cancel their layaway order.

My Take

Most of us grew up on layaway. When I was a kid, I remember when my mom used to put school clothes and Christmas gifts on layaway. As a single parent, she didn’t have the money to pay the full amount upfront. Layaway plans were and still are a convenient way to shop and pay for items you want while staying on budget. But with layaway you may be limited on the amount and types of items you can put on hold. BNPL apps, on the other hand, have become increasingly popular for the past few years. More so, because of the different types of products that can be sold through these services. According to, many consumers have had to use BNPL apps, such as Zip and Klarna, to buy groceries and household items due to inflation. Because of the of flexibility of BNPL platforms, many consumers can purchase the items they need that they would not be able to with layaway.

Although BNPL apps are becoming well known, they may not be the right tender for your holiday shopping. During a virtual conference held by Industry Dive, a business journalism company that covers the most competitive industries around the world, Lynne Marek, lead editor of Payments Dive, and Caitlin Mullen, reporter at Payments Dive, spoke on the future of BNPL apps. They predict that most consumers will use credit cards for their holiday shopping instead and that credit bureaus are looking into ways to incorporate BNPL loans in their databases. So, if you’re new to the credit world and building credit is your goal, then BNPL apps may not be the right move for you. In the end, do what is best for you and your pockets. There are pros and cons to both layaway and BNPL apps but depending on your situation you may need one of these services. Make sure to do your research before you opt in to either of these services.