Yesterday, Black Enterprise Managing Editor Alisa Gumbs forwarded a press release to our entire content team announcing retail chain Sears’ promotion of online layaway at barbershops to potential shoppers, so that they could experience the service firsthand. The release was accompanied by a photo of Ronald Larry, a regular patron of De’ Bon’s Barber Shop in Chicago, test driving Sears’ new online layaway program for the first time.
“Now that Sears has layaway online, not only is it easy on my wallet,” Larry is quoted as saying in the release, “it’s easy on my time. I can even get that new flat-screen TV I want, and have it in time for Christmas.”
Gumbs response to this expression of shopping glee is a refrain that echoes often around the offices of Black Enterprise: “This is a hot mess.”
I was confused by her response. I couldn’t see why making layaway more available and accessible as a shopping option, especially given the current economic environment, couldn’t be a good thing. When I pressed her on this point, she responded, “You don’t find anything funny about Sears going into barbershops to try to get black people to use modern technology to buy high-end electronics that they can’t afford–on layaway?”
The truth is, I found it both funny and ironic. However, without layaway and online technology, these same people were still buying high-end electronics that they couldn’t afford, only they were doing it using high-interest credit cards.
With credit cards, they were paying in installments after the purchase and being charged compounded interest to boot. With layaway, they pay the installments in advance, only buying the merchandise after they’ve reached their “savings” goal, and without incurring the interest charges and other fees that are the vast majority of burgeoning credit card balances. With layaway, you have to budget for the purchase, and you have to really want it, since you have to pay nonrefundable fees to participate and failing to keep up with the payments could mean losing all or part of your deposits, depending on the policy of the retailer. Layaway eliminates impulse buying and forces delayed gratification, even if it’s for an item you shouldn’t be buying in the first place.
Back in the day, up until the 1980s or so, layaway was a very prominent option for low- and middle-income shoppers. Then more Americans began to gain access to credit cards, until we finally reached a point where just about anyone (including unemployed college students) could get them–even if they did come with sky-high interest rates and a myriad of fees and penalties in the small print. Layaway faded away as a shopping option, although it never really disappeared.
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