The buy-now, pay-later mentality of credit cards has been a major factor in reckless and irresponsible consumer behavior. Replacing layaway plans with easy access to high-interest credit has had devastating consequences for lower- and middle-income families, and black people in particular. The public embarrassment of buying goods on layaway (an admission that you were too poor to just buy what you wanted outright), has been replaced by the private shame of crushing credit card debt. I’d rather see people use layaway to save toward buying that flat-screen TV outright, than watch them use credit cards to borrow the money to buy it now, only to pay several times it’s retail price in interest and fees for months and even years after the purchase.
But now, with Americans struggling with high unemployment, job insecurity and a difficult economy, and retailers desperate to lure shoppers back into stores, layaway is making a major comeback. Now retailers including Sears, K-Mart and Toys-R-Us are trumpeting installment payments as a time-saving, cost-effective option for those looking for the ways to reduce pressure on limited household budgets. There are even online layaway service providers, such as eLayaway, allowing shoppers access to a variety of participating retailers. I think that’s a good thing, and Gumbs agreed with me. There’s just this one little thing:
“My issue with Sears targeting blacks in barbershops for online layaway is: How do you think they’re making online payments for their layaway?,” says Gumbs. “I’m betting it’s with those same high-interest credit cards (the accepted online payments are Sears Card, Sears MasterCard, Visa, MasterCard, Discover, American Express, Sears Gift Card, PayPal).”
Ruh Roh! She had me there. Using credit cards to make installment payments on that giant flat-screen cancels out the primary benefits of layaway plans, at least in terms of encouraging financial discipline and the save-for-what-you-want mentality we need to embrace if we are to avoid excessive debt, maintain a positive household net worth and ultimately build wealth for life.
I still applaud the comeback of layaway. But if you’re going to choose this option, do it the old-fashioned way. Make installment payments with the money you actually have in your pocket. (Or in the bank, if you can use your debit card. But you’ll have to monitor your bank account like a hawk to make sure you keep balances high enough to avoid overdraft fees if there’s not enough in the account to cover your layaway payments). Please, please don’t use credit cards to borrow money to make layaway payments.
Alfred Edmond Jr. is the editor-in-chief of BlackEnterprise.com