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A National Examination on Payday Loan Use and Financial Well-being: a propensity score matching Approach

Author

Listed:
  • Zibei Chen

    (University of Tennessee College of Social Work)

  • Terri Friedline

    (University of Michigan School of Social Work)

  • Catherine M. Lemieux

    (Louisiana State University School of Social Work)

Abstract

Payday loans are one of the most controversial alternative financial services due to their staggeringly high interest rates and the potential for users to become heavily indebted. Findings regarding the relationship between payday loan use (PLU) and financial well-being are mixed and inconclusive. As the pervasive use of payday loans continues, empirical knowledge remains limited regarding how PLU affects daily money management and long-term financial outcomes among U.S. households. Using a nationally-representative sample, the current study investigates the relationship between PLU and household financial well-being. A propensity score matching analytical approach was used to address selection bias. Results suggest that PLU can be harmful to daily money management such as paying bills and making ends meet, but also serves as a cash flow alternative on which households rely to cope with emergencies. Findings indicate a complex relationship between use of payday loans and financial security, calling for more nuanced investigations focused on the impacts of the fringe economy on family well-being.

Suggested Citation

  • Zibei Chen & Terri Friedline & Catherine M. Lemieux, 2022. "A National Examination on Payday Loan Use and Financial Well-being: a propensity score matching Approach," Journal of Family and Economic Issues, Springer, vol. 43(4), pages 678-689, December.
    • Handle: RePEc:kap:jfamec:v:43:y:2022:i:4:d:10.1007_s10834-022-09853-0
    DOI: 10.1007/s10834-022-09853-0
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    1. Hu, Bowei, 2024. "Banking Without Banks: How Bank Account Ownership Influences Racial Disparities in Alternative Financial Services," OSF Preprints mcew5, Center for Open Science.

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