2019 Conference

Alternative, Financial, Services, Credit, Cards, Utilization, Payday, Loans, Check, Cashing

Approximately 28% of U.S. adults use alternative financial service (AFS) providers to obtain check-cashing services, seek payday advance loans, or both (non-bank financial service users, NBFS).  This paper focuses on three distinct categories of AFS users: 1) individuals who utilize payday loans; 2) individuals who utilize check-cashing services; and 3) individuals who utilize both. We describe the key demographics of these groups and illustrate how these three groups differ from each other and from the general population.  We find that approximately 8% of the population seek payday loan services outside of banking institutions, 14% seek check-cashing services, and about 6.5% of the population are NBFS users of both.  Relying on a nationally representative dataset (sourced from NORC’s AmeriSpeak panel) of over 10,000 respondents, key findings suggest that compared to the general population, AFS users are less likely to own a credit card by a significant margin.  Additionally, 56% of check-cashing users lack a credit card, 50% of payday loan users, and a full 64% of users who use both services do not own credit cards.  This suggests that about 1 in 3 American adults likely does not have adequate access to credit cards, quality loans, and other financial services which the rest of the population enjoys.  Compared to the general population, AFS users show a different set of behaviors when managing their money.  This paper seeks to identify and discuss some of those key differences of behaviors as they apply to interaction with bank tellers, using cellphones to manage accounts and other approaches to money management undertaken by the AFS population.