Is layaway the answer to America's credit woes?

In the news for August: Layaway is back, with camera crews and NPR pundits variously highlighting and panning racks full of bags of school supplies, laid away until the next payday or unemployment check. And I am suspicious; is this the answer to America's credit woes? I doubt it. In fact, it could be just one more bonehead financial move by the American populace.

I may only be 35, but I am old enough to have observed an astonishing cycle in American consumer spending habits; one that will certainly be studied by economists and social anthropologists for decades. Though credit cards were invented in 1946, it was not until 1966 that the card we know today -- the general-purpose credit card that could be used nationally -- was launched by Bank of America (BAC), in a separate brand that would later become Visa. And even that did not become commonly used by the lower-income and middle-class consumers until the 1980s. Before that? There was layaway.

I don't remember my family ever using layaway, but I remember its shiny promise; I remember the general store in the little town of Dillon, Montana, where we went to school when I was 10, and its big layaway room that would fill up as Christmas approached. Pay now with the promise of future wages to redeem your goods. It was a hedge for department stores, which had started to take on a huge risk with the ubiquitous store charge cards; if consumers weren't able to pay, they were on the hook for collections costs and write offs. In the 1970s and 1980s, only the wealthy had Visa, and they, after all, could pay. For the truly downtrodden, for those who had no income or didn't have any more room on their department store cards, layaway was the answer; and the consumer was the one holding all the risk.

My dad was employed for most of my childhood, but always on the extreme low end of the wage-earning spectrum, and I asked him if he'd ever used layaway. "No," he said. "If there was something we needed, we had credit." I recalled many an appliance purchased through Sears' (SHLD)charge card, and the Montgomery Ward charge was the way we bought new shoes.

Now he's blessed with all the credit he could possibly need, but the next generation of young, struggling families are losing theirs. Instead of putting $30 backpacks and $25 worth of pencils, paper and pink erasers on credit, they're putting them on layaway. Sears Holding Corp's Kmart says this is a record-setting year for layaway, and it's starting far earlier than usual (it typically picks up around the end of October, says Sears).

Retail analyst Howard Davidowitz says the steep rise in layaway rates -- and the growing demand of consumers for the service -- is a sign of "desperation and weakness" and is an indication that Americans are seeing a "crisis" where there is none. Can't afford a new pair of jeans, a pair of running shoes, a really spiffy Trapper Keeper? Pay a little and pick it up later. Like payday loans, these are just a new way for consumers to fall deeper into the hole and find it harder and harder to survive from check to check.

Layaway, while not the evilest of all possible evils, is just another way for Americans to buy now, spend later. It's a less damaging way -- after all, if the money to redeem purchases doesn't materialize or is required to pay the electric bill, consumers can walk away a little poorer, but without a mounting debt pile.

But the smarter choice would have been to find a way not to spend (do you really need a new set of markers or can you make do with last year's?) or visit thrift stores, patch the old jeans, accept hand-me-downs, heck, make a new dress out of old curtains Scarlett-style. If this was a real crisis, we would be acting more like responsible adults -- like my parents back in Dillon, only buying what they could afford and never visiting the layaway room -- and not like modern Americans, always desperate for instant gratification without rational analysis.

It's not as convenient or fun, but real fiscal responsibility means only paying for consumer goods that you can buy today.

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