buying and selling of goods on credit, with the stipulation that payments shall be made at specified intervals in set amounts. The goods may be used by the buyer before or upon first payment, but legally belong to the seller until the last payment has been made. If the buyer defaults, the seller reclaims the goods, and all former payments are forfeit. The layaway plan is another form of installment purchase, in which the merchandise is held by the retailer until the total selling price of the item has been paid. The installment buyer pays a higher price, the difference covering interest on unpaid balances, insurance, and financing charges. Originating in Paris in the early 19th cent., the practice of retailing goods on the installment plan was first used in the United States to sell sewing machines, pianos, and household furnishings to low-income consumers. After 1916, when manufacturers began to offer automobiles on the time-payment plan, installment selling rapidly came to include durable goods of every kind (household appliances, radios, oil burners), which otherwise would have been out of reach for the average income earner. Today, large merchandisers often issue their own credit cards, and banks frequently offer personal loans to consumers that may be repaid in installments. In recent years, installment buying has become common at all income levels, particularly in the financing of automobiles and real estate properties. The credit card has shifted the risk of delinquent payments from the merchant to the issuer of the credit card, in many cases a bank.

Bibliography

See E. N. Compton, The New World of Commercial Banking (1987).