Download the Report

Payday loan apps issue small, short-term loans that are typically repaid on the consumer’s next payday either directly from a bank account or as a payroll deduction. Consumers access these loans using an app on their smartphone by linking their bank accounts or by enrolling through their employer. While these products are sometimes referred to as “Earned Wage Advances” (or by similar names), we use the term “payday loan apps” throughout this report, given the essential characteristics they share with payday loans obtained from physical storefronts. These credit products are marketed as ways to help workers weather financial shocks, but new analysis reveals a different reality. 

This latest research report uses transactions data to track users’ borrowing over a full year after their initial loan. We find that borrowing from these apps is rarely a one-time event. Instead, many users return for additional loans soon after their first, with borrowing frequency increasing over time. As these loans accumulate, so do the associated fees and risks of overdraft, pushing many households deeper into financial precarity.

Key Findings

  1. Borrowing from payday loan apps escalates over time. On average, users doubled their borrowing frequency within the first year of tracked usage, rising from two to four loans per month.
  2. Simultaneous borrowing across multiple apps increases over time. Most users (53%) borrowed from more than one lender during their first year. The share of payday loan app users who borrowed from multiple apps in a single month more than doubled from 16% in the first month to 38% in month four, and increased to 42% by month twelve.
  3. Heavy users face much higher costs. During the first year of tracked payday loan app usage, heavy users paid $421 in total loan and overdraft fees, almost triple the costs for moderate users and more than six times those of light users.
  4. Payday loan apps come with steep costs. The average APR for observed loans that were repaid in 7 to 14 days was 383%, a rate comparable to a typical storefront payday loan (391%).