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

Zibei Chen (), Terri Friedline () and Catherine M. Lemieux ()
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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

Journal of Family and Economic Issues, 2022, vol. 43, issue 4, No 4, 678-689

Abstract: 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.

Keywords: Payday loan; Alternative Financial Services; Financial Well-being; Propensity score matching (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s10834-022-09853-0

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