Pecuniary Mistakes? Payday Borrowing by Credit Union Members

Susan P. Carter, Paige M. Skiba and Jeremy Tobacman

in Financial Literacy: Implications for Retirement Security and the Financial Marketplace

Published in print October 2011 | ISBN: 9780199696819
Published online January 2012 | e-ISBN: 9780191732089 | DOI:

Series: Pensions Research Council

Pecuniary Mistakes? Payday Borrowing by Credit Union Members

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This chapter examines patterns of financial choices by a credit union's members using transaction-level administrative data on checking, savings, and line-of-credit (LOC) accounts. We observe substantial payday loan use when cheaper sources of liquidity are available, resulting in average interest losses of about $88 over six and a half months. In addition, we find much higher levels of transaction activity by payday borrowing members than by other members, at half the average transaction dollar magnitude. These results are consistent with previous work identifying financial stress and decision-making challenges.

Keywords: credit; payday loans; interest; checking; financial; saving; liquidity; mistake

Chapter.  4443 words.  Illustrated.

Subjects: Pensions

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