Middle Class Layaway Finance Finesse Is Keeping The U.S. With $4 Trillion Of Debt

By Fredrick Lee

  • By 2042, only 15% African American will be considered middle class
  • U.S. Consumer debt has reached $4T

Layaway installment plans from the past are making a return, as a way for African-Americans to possibly maintain their lifestyle. They are struggling to stay in the middle class while dealing with growing consumer debt. U.S. consumers have more than $4 trillion in debt and the Brookings Institute found that by 2042, only 15% of African Americans will be considered middle class. Many retailers and fintech companies see layaway plans as an opportunity to get consumers to spend more, while increasing their revenue.

Why This Matters: Specifically, African-American families have only 10 cents for every dollar held by White families in wealth. With cost of living expenses outpacing wages, African-Americans are struggling to stay in the middle class. Many people are living on borrowed money that pays for things like higher education, electronics, clothing, and cars.  

Specifically, African-American families have only 10 cents for every dollar held by White families in wealth

Retailers like Best Buy (BBY +1.67%), Walmart (WMT +0.15%), and Urban Outfitters (URBN +1.87%) offer layaway plans for most of their items. Fintech firms including Affirm, Afterpay Touch Group (AFTPF -4.70%), and PayPal Holdings (PYPL -0.55%) are using the old school financing tool to help customers buy big ticket purchases like TVs, high end clothes, and washers.

While layaways are not new, African-Americans are seeing this as a way to purchase big ticket items. Companies hope the appeal of layaways get consumers to buy items through payment installments and likely to spend more money. The strategy appears to be working as fintech firms are seeing big returns through their layaway installment plans. In 2018, Affirm’s point-of-sale loans doubled to $2 billion and it expects to triple that number in 2021.

Situational Awareness: Interestingly enough, folks see the thought of carrying a credit card balance as a problem, even though many African-Americans are having a hard time staying in the middle class. Companies see this as an opportunity to help finance the middle class lifestyle through layaway plans. These plans may come at a steep price for African-Americans and the lingering question is how much is this demographic willing to pay to stay in the middle class?

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