You might think you’re being smart when you put a big-ticket purchase on layaway–a retail plan that allows you to pay for an item over a few weeks or months–but you’ll be digging yourself in a deeper financial hole, reports Time’s MoneyLand.Big box retailers following in Wal-Mart’s footsteps like Sears, Kmart, Best Buy and Marshalls (via Buxr) don’t want you to know this, because they assume you’ll just spend, spend, spend. And they aren’t far off, the Times’ Louis Hyman writes in his recent op-ed:
“Imagine a mother going to Wal-Mart on Oct. 17 and buying $100 worth of Christmas toys. She makes a down payment of $10 and pays a $5 service fee. Over the next two months she pays off the rest. In effect, she is paying $5 in interest for a $90 loan for two months: the equivalent of a credit card with a 44 per cent annual percentage rate, a level most of us would consider predatory.“
Which, of course, these layaway plans might be for the wrong consumers.
Though layaway fell out of vogue in the 90s, when lower-income Americans had more access to credit, the re-instatement of the service makes it crystal clear that 1. retailers are exploiting America’s impulse shopping problem, and, as Hyman argues, 2. the inverted notion that they’re actually saving for something, when in fact this is 3. just another marketing ploy that plays on our economic insecurity, stemming from “Americans’ inability to borrow, save, and most important, earn.”
Stretching out payments for your son’s new Elmo toy isn’t being responsible if you made the purchase in haste and can’t afford it.
If you’re bent on getting your credit right this season, take heed of the precautions above and thank us later.