One of my faithful readers has been Thelma DuPont. Thelma and I worked in the overseas department of the AT&T Company before both of us retired, which seems like in the last century. Thelma and I grew up nearly 1,000 miles apart yet, judging from her letters to me, we had similar experiences. For example, there was the essay about iceboxes and the problem of taking of the drainage as the ice melted.
So I will be pleased to see if Thelma remembers another Depression story. If anyone doubts that we have had another brush with a Depression, those doubts should disappear. There are lost jobs, banks failing, and people out of work for extended periods of time. Beyond that, it seems to me that merchants are advertising pre-payment on the installment plan. One of the most popular plans is called “layaway.”
When a person on limited means sets out to shop, he may find a bargain that is too delicious to pass up. Let us say that the object of our desires is a new set of dishes or a washing machine. For those without the means to pay for that purchase all at once, many merchants now offer the so-called layaway plans or installment payments. This is right out of the 1930 handbook.
When a housewife sees this new set of dishes or the washing machine, her limited means will prevent her from going into the store and paying cash and taking the purchase home with her. On the other hand, if the store offers installment payments, she may go into the store and put a small payment down against the eventual purchase. From time to time, she may take some more cash to the store, using the booklet that has been provided by the people who are sponsors of the installment plan or the layaway buying offer. Theoretically the housewife will continue her payments until the price of the object of her desires has been fulfilled. At that point, she may present the finished booklet to the merchant in question and ask for her set of dishes or her washing machine.
In the current case, I see no provision for the payment of interest on the money delivered to the merchant. The merchant simply takes the payment, marks down the amount of the payment, and surely tells the housewife that if she keeps on paying, she may soon have the set of dishes or the washing machine.
The layaway plan is a close relative of the installment payment idea, but I assume that the merchant will actually take the desired object and put it aside until all of the payments have been made. In point of fact, the merchant may not have the desired object, but given the amount of time between the first and final payments, he will have time to acquire it.
Merchants seem to regard the installment plan or the layaway as a service to their prospective customers. That may or may not be true. If the merchant simply takes the money until the full purchase price has been reached, the merchant is ahead of the game. But poor people may not realize the sophistication of this arrangement. Paying on the installment plan or the layaway plan, the result is the same. The merchant has the upper hand and if the merchant ever grants interest on the payments being made, it will come as news to me.
But the fact is clear that paying on the installment plan or the layaway plan is a blood relative to what took place in the 1929 Depression. I can not find it in my heart to fault the merchants because their prospective customers are forced to save under this arrangement. But no matter how you cut it, the fact that we narrowly missed another Depression is obvious. When merchants advertise the installment plan or the layaway plan, they are redeeming the playbook of the 1930s.
There is an alternative to the installment plan or the layaway plan. It is the merchant simply extending credit to the buyer. I suppose that merchants must take a degree of risk in extending credit to their customers. But on the other hand, during a depressed economy, if the choice is selling something and extending credit or refusing to grant credit, there will be no movement of merchandise. During the Depression, my mother patronized a grocer named John Gualdoni, who knew of our circumstances and who extended credit to my mother. Times were tough during the 1930s but it is clear that John Gualdoni was high on the list of creditors. The Carr family liked John Gualdoni but even if they had disliked him, he was our only source of food. So John Gualdoni was paid, even though it involved some sacrifice.
In the 1930s, it was a cash economy. When a man set out to court his girlfriend, he had to have enough money to cover the cost of drinks and entertainment and, in the New York area, cab rides. Those of you with long memories may recall that when the men were stepping out on the town, they were often the subjects of robbery in certain sections of the city. If a man was escorting a beautiful woman with a corsage, the robbers would assume that the gentleman in question was affluent. And so they robbed him.
In about 1959 or 1960, help arrived for those who felt the need to carry a pocket load of cash as they set out to do the town. That was when credit cards came into being. My first encounter with credit cards had to do, I believe, with Diners’ Club. My recollection is that the Diners’ Club had a small booklet in which the names of the establishments of all of those who accepted such a proposition were entered. In that case, a person could be relieved of carrying great amounts of cash and simply present his credit card at the end of an evening of dining and drinking. Within a matter of a few months, the idea of credit cards caught on. As time progressed, the credit card idea was exploited and I suppose at this point I have been offered perhaps 150 credit cards. I have not accepted them of course, simply sticking to the one or two basic cards. But the idea of credit is a pretty good one. In those cases, the merchants pay a fee to the credit card companies for the business generated by the credit cards. I can remember writing a check to the King’s Grocery Store for every purchase made there. I suspect that in the current arrangement, 95% of the people patronizing all kinds of stores present credit cards.
So you see, in this essay we have progressed from installment buying and layaway plans to merchants granting credit as in the case of John Gualdoni, and to credit cards themselves. As I said in the beginning of this essay, the inspiration was Thelma DuPont. When she reads this essay, I hope that she will wrack her brain and tell me about her experience with credit over the years. For all I know, my old buddy Thelma may well have used the layaway plan here in the New York area. But on the other hand, it might be that Thelma had a secret source of cash and paid for everything as it was delivered. I suppose that I will have to wait for a letter from Thelma after she reads this essay to find out what took place.
E. E. CARR
May 1, 2010
Essay 453
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Kevin’s commentary:
I actually use cash more than half the time, because I’m a weirdo, but we still aren’t quite at 95% I think (Huffington Post says we’re somewhere between 23% and 27%. Now since many people own more than one credit card, I would say that there are probably twice or three times as many credit cards in the US than there are people. There are some very hip companies in the Bay Area that ONLY take credit card now, which I find frustrating purely because I’m stubborn.
I’m very curious if Thelma ever got back to Pop; if she did I’d love to post her reply in line here.