Layaway Christmas

October 23, 2008 11:12 a.m.

K-Mart has a new ad: Pick out your Christmas presents today, pay a little now and a little as you go along, then pick up your paid-for presents in time for holiday giving. If we needed evidence of the constriction of consumer credit, here it is. K-Mart is advertising the layaway plan that department stores used for decades before the free flow of credit turned the layaway plan into a relic.

With Mastercard and Visa cards handed out like cheap candy, layaway plans had nearly disappeared. The old-fashioned method for budgeting–pay a few bucks each week on your purchases — made no sense to millions of customers who could take the goods home and pay a little each month forever after. For more than a decade, when I have taught 507(a)(7) priorities, I have had to explain these transactions to a roomful of students who have never even heard of pay-in-advance. (And special thanks to one of those students, Sydney Leavens, who recognized the connection to the K-Mart ad.)

Could this ad be an early sign of how purchasing will change in America? A Pay-Now, Buy-Later plan will undoubtedly constrict spending in the short term, but in the long-term it would mean that the money that now goes to interest, fees and interchange fees (about $107 billion in 2007) can be used to buy socks, haircuts, prescription drugs and a million other goods and services.

Retailers pay about $23 billion in interchange fees so that their customers can use credit cards. Today’s retailers say they have no choice: so long as their competitors take credit cards, they must do the same or see their customers migrate elsewhere. But if credit availability contricts across the board for consumer, the long-term fallout for K-Mart and thousands of other retailers may not be all bad.

Get TPM in your inbox, twice weekly.
Your subscription could not be saved. Please try again.
Your subscription has been successful.

I realize the operative word is “long-term.” If credit loosens up quickly, then cash-in-advance will be a temporary blip. And for retailers who can’t survive the readjustment (and short-term loss of sales) from credit to cash, then the long-term readjustment doesn’t mean much. But non-credit purchasing could be the wave of the future.

It could be an old-fashioned, new-wave lay-away Christmas.

Latest Cafe
Comments are now Members-Only

Non-members are still able to read comments, but will no longer be able to participate. To join the conversation, sign up now and get:

30% Off Annual Prime Membership

TPM strives to build as inclusive a community as financially possible. We offer FREE memberships to those experiencing financial hardship and FREE memberships for students.

View all options
Masthead Masthead
Founder & Editor-in-Chief:
Executive Editor:
Managing Editor:
Associate Editor:
Investigations Desk:
Audience Development Editor:
Editor at Large:
General Counsel:
Head of Product:
Director of Technology:
Associate Publisher:
Front End Developer:
Senior Designer: