Pecuniary Mistakes? Payday Borrowing by Credit Union Members

23 Pages Posted: 13 Nov 2010  

Susan Payne Carter

Vanderbilt University

Paige Marta Skiba

Vanderbilt University - Law School

Jeremy Tobacman

Alfred Lerner College of Business and Economics, University of Delaware

Date Written: November 11, 2010

Abstract

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

Suggested Citation

Carter, Susan Payne and Skiba, Paige Marta and Tobacman, Jeremy, Pecuniary Mistakes? Payday Borrowing by Credit Union Members (November 11, 2010). Pension Research Council WP 2010-32. Available at SSRN: https://ssrn.com/abstract=1707657 or http://dx.doi.org/10.2139/ssrn.1707657

Susan Payne Carter (Contact Author)

Vanderbilt University ( email )

2301 Vanderbilt Place
Nashville, TN 37240
United States

Paige Marta Skiba

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States
615-322-1958 (Phone)

Jeremy Tobacman

Alfred Lerner College of Business and Economics, University of Delaware ( email )

Newark, DE 19716
United States

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