Louis Hyman: Laid Flat by Layaway

Louis Hyman is an assistant professor of history at Cornell and the author of “Debtor Nation: A History of America in Red Ink.”

IN another sign that the national economy is suffering through a rerun of the 1970s, Wal-Mart recently announced that it was bringing back its Christmas layaway program. Beginning on Oct. 17, shoppers who buy at least $50 worth of goods, put 10 percent down and pay a $5 fee will be able to pay for their purchases slowly over the next two months, all for the ostensible purpose of avoiding debt.

Wal-Mart’s press releases suggest that the restoration of the layaway program, which was discontinued in 2006, is meant to help its customers “budget” so that Christmas can be “worry-free.” The company is partly playing on the economic insecurity of its customers, and partly on the national nostalgia for the days before credit-card debt. But the truth is, the program is a bad deal for everyone — except Wal-Mart.

Wal-Mart is not alone in the return to layaway; Sears and Toys “R” Us also have revived their programs. The plans first became common in the 1930s. Stores that catered to the well-to-do, like department stores, offered no-interest credit to be paid off at the end of the month. But store owners feared extending such offers to lower-income shoppers, believing they were likely to be slow to repay, or even default on their debt, which would tie up the store’s working capital....