Payday lending's plastic cousins, subprime credit cards, are cheaper but come with some strings attached. Anyone with a credit score in the 500 range or below will most likely not qualify. According Anisha Sekar, vice president of credit and debit products at San Francisco–based consultancy NerdWallet, a subprime credit card such as First Premier Bank's Aventium and Centennial cards each have a $300 credit line, at 36 percent interest. But a $75 annual fee in the first year — dropping to $45 in subsequent years — effectively reduces that limit to $225. A $95 security deposit paid in advance isn't counted against the borrower's limit, but a $6.50 per month fee is, further reducing the amount available for borrowing. Customers can get cash advances, but those are capped at $30 for new customers.
"It's important to note that cash advances begin accruing interest on the first day they're taken out, unlike regular purchases, which give you a grace period of 20 days," Sekar says. "The instant accrual, as well as the typical 3 to 5 percent cash advance fee, makes these loans particularly expensive."
After 90 days, if their account is current, with no delinquencies, borrowers can get the cap on cash advances lifted to $150. But those same interest accrual policies apply.
This article was reported in partnership with The Investigative Fund at The Nation Institute with support from the Puffin Foundation.