The perception that cash advances are primarily used by low-income individuals and families is now shown to be a fallacy. Recent news indicates that payday advances are also being used by the middle class. The largest payday lender, Advance America Cash Advance has been actively marketing to middle class working families.
As business for the burgeoning payday loan has expanded, so has the type of consumer that uses payday loans. In the past fast cash personal loans
were used by people who needed emergency funds to cover short-term expenses. The payday industry has been opening retail financial centers in middle class and upper class neighborhoods.
Helped by increasing cash funds on hand the payday industry has had an almost exponential growth in the past twenty years. Also, the lenders have been helped by the new economic squeeze upon the middle class; the recent two years has seen the middle class desperately trying to sustain themselves with increasing gas prices and less purchasing power.
It is a common perception that payday loan lending targets low-income consumers encasing them in a perpetual cycle of debt. However, a recently released study by Donald P. Morgan, Research Officer with the Federal Reserve Bank of New York
, and Cornell University graduate student Michael R. Strain, “Payday Holiday: How Households Fare after Payday Credit Bans,” challenges the general assertions about payday loans.
The study shows that in states where payday lending has been outlawed, there have been more bounced checks and Chapter 7 filings. The new landscape of payday lending is changing; new cash advance stores are opening near middle class neighborhoods and shopping malls. Advance America has opened several locations from coast to coast in non-traditional payday markets such as, middle class and upper class shopping areas. For example, lenders are providing loans in upscale Chesapeake's Edinburgh Commons in Virginia, an area that encompasses million-dollar homes.
The shift to middle and upper class locales by payday lenders
also symbolizes the extent to which Americans are being squeezed by the current state of the economy. If the middle class and upper middle class are turning to payday loans, imagine the state of low-income households?
It seems that people beyond the traditional customers are evaluating the merits of payday loans. By all accounts based on billions of dollars of loan volume, consumers find the convenience of payday loans better than credit card advances, overdraft fees, or late fees. Also, convenience is a prominent factor when accessing online cash advance payday loans, faxless payday advance and fast cash loans
through the internet. Any way you slice it, the payday industry is advancing to new markets.