Federal Reserve Board Survey Looks at Changes in U.S. Family Finances
The Federal Reserve Board’s Survey of Consumer Finances, Changes in U.S. Family Finances from 2004 to 2007: Evidence from the Survey of Consumer Finances, provides insights into changes in family income and net worth since their 2004 survey. For the first time, the survey collected information on whether a family member had taken out a payday loan in the past year. They defined payday loans as a loan “that was supposed to be repaid in full out of that person’s next paycheck.”
Full results of the study
Review all study highlights (PDF)
Specific to payday lending, the survey found:
- A very small percentage of U.S. families have used a payday loan
“Overall, 2.4 percent of families reported having taken out a so-called payday loan.”
- Younger families are more likely to use payday loans
“The fraction of families that had taken out a payday loan declined with age, falling from 4.9 percent of families headed by a person younger than age 35 to essentially 0 percent for families headed by a person aged 65 or older.”
- Families use payday loans for emergencies or other urgent needs
“The data indicate that families tend to take out payday loans to finance immediate expenses.”
“The most common reason given for choosing a payday loan for families that had taken out such a loan was ‘emergencies’ and similar urgent needs or a lack of other options (35.9 percent).”
“Roughly equal shares of families cited convenience in obtaining the loan (21.0 percent) or the need to pay for living expenses, including food, gas, vehicle expenses, medical payments, utility costs, or rent (20.6 percent).”
“A smaller fraction, 10.8 percent, of these families reported a need to pay other bills and loans...The remaining 12.6 percent of families with a payday loan in the past year cited other needs, including ‘Christmas’ or the need to ‘help family’.”
- Payday loans are used most by low or middle income families
“Across income groups, the share of families that reported such a loan was between 3.5 percent and 4.0 percent for the bottom three quintiles, but families in the top two quintiles reported virtually no use of this type of short-term loan.”
Of note: The groups that are created when a distribution is divided at every 20th percentile are known as quintiles. Families in the first income quintile, for example, are those with income below the 20th percentile. In this survey, families in the 20th percentile reported incomes of $20,600; 40th percentile: $36,500; 60th percentile $59,600; 80th percentile $98,200; 90th percentile $140,900.
