“It’s a Last Resort. But It’s a First Resort”: A Relational Perspective of Payday Loan Use

Abstract

In the United States, there is widespread use of payday loans, a high-cost credit product, among lower-income populations. Existing literature suggests that structural constraints like limited banking access or behavioral factors like lack of financial knowledge explain why so many individuals use these costly services. Yet neither explanation sufficiently captures the complexity of decision-making around using payday loans. Drawing on 40 in-depth interviews with payday loan borrowers, this study reframes payday loan borrowing as a future-oriented strategy that balances immediate financial needs, social relationships, and long-term aspirations. The interviews advance a relational account of decision-making, revealing how borrowers use payday loans to work toward an aspired future self—one that is self-reliant, with savings, good credit, and strong, tension-free relationships with friends and family. Findings highlight why individuals may make financial decisions that diverge from recognized “best practices.”

Introduction

Over the past few decades, American families have faced declines in real wages, increases in economic inequality, and increases in job precarity (Duncan and Murnane 2016; Piketty and Saez 2014). In a context in which families increasingly face economic fragility (Morduch and Schneider 2017; Piketty and Saez 2014), consumer credit has become a central feature of household finance (Krippner 2017). Families turn to a range of existing consumer credit options to make ends meet (Lee and Kim 2018; Schafter, Wong, and Castleberry 2009; Wilson et al. 2010).

This study aims to deepen our understanding of how individuals, particularly low-income individuals, navigate an increasingly complex and financialized economy when facing uncertain futures. To this end, we use payday loans as a case study. Payday loans are high-interest, small-dollar, unsecure, short-term loans repaid in a single lump sum from the borrower’s next paycheck (generally, repayment is expected two weeks from transaction’s date). Payday loans often carry annual interest rates of 400% to 600% (Bhutta, Skiba, and Tobacman 2015; Hawkins 2012). Payday loan borrowing, particularly repeated borrowing, is associated with a range of financial hardships including food insecurity (Chang 2019; Fitzpatrick 2024; Melzer 2018), bankruptcy (Skiba and Tobacman 2019), and accrual of bank overdraft fees (Gathergood, Guttman-Kenney, and Hunt 2019).

To date, several quantitative studies have investigated decisions to borrow payday loans, yielding mixed conclusions. Existing studies suggest either that payday loans are used as a “last resort” when all other available options have been exhausted, or that they are a preferred source of credit among some populations (e.g. Agarwal, Skiba, and Tobacman 2009; Bhutta, Skiba, and Tobacman 2015; Servon 2017). For the latter, the alleged preference for payday borrowing over lower cost products is explained as either resulting from individuals’ inability to make economically optimal choices (e.g., lack of financial knowledge, cognitive biases) or their moral failings (e.g., lack of willpower, self-control, or good judgment) (Bullock et al. 2020; Fuentes 2009; Servon 2017).

We move beyond explanations that focus on the immediate financial availability of credit or individuals’ cognitive tendencies and incorporate relational considerations to our understanding of high-cost borrowing. A relational account of financial decision-making delves into how interpersonal relationships and socio-cultural meanings motivate high-cost credit use (Bandelj, Wherry, and Zelizer 2017; Wherry, Seefeldt, and Alvarez 2019; Zelizer 2017). Notably, although our relational approach remains embedded within structural constraints in access to credit (e.g., Cohen-Cole 2011; Dwyer 2018; Faber and Drummond 2024; Small et al. 2021) and is complementary to existing explanations that focus on cognitive biases (e.g., Mullainathan and Shafir 2013; Prager 2009; Schilbach, Schofield, and Mullainathan 2016), it can meaningfully expand our understanding of when and why individuals choose “costlier” options when financially cheaper alternatives are available. To do so, we ask participants about a range of sources of credit in addition to payday loans, offering a bottom-up perspective on how consumers use relational factors to informally rank various sources of credit (Wherry, Seefeldt, and Alvarez 2019). Thus, we also advance a literature that often looks at individual sources of credit separately in favor of a perspective seeing all sources as interrelated (see Dwyer 2018).

Our findings build on existing sociological research by showing how individuals weigh the emotional and social costs of debt alongside its financial terms. They shed light on how individuals, and particularly low-income individuals, use credit options to protect social relationships and promote socially valued identities. Specifically, decisions about whether to borrow from friends and family, dip into savings, or use credit cards were grounded in concerns about independence, dignity, and relational strain—concerns that payday loans, paradoxically, often helped alleviate. Perhaps surprisingly, our findings also reveal that, rather than reflecting present bias, payday loans were often part of future-making strategies, where immediate needs were managed in ways that safeguarded long-term aspirations, such as homeownership. This important temporal dimension (Hayes 2024) of our relational approach shows how resource-strapped individuals may use high-cost credit to preserve future self-reliance and attempt social mobility (Beckert 2016; Zelizer 1994). Yet, these attempts to fulfill societal relational expectations may still be economically costly and contribute to increasing gaps in indebtedness.

Background

High-Cost Credit and Borrowers’ Well-Being

Many American families face a significant degree of household economic fragility (Lusardi, Schneider, and Tufano 2011; Morduch and Schneider 2017) and turn to consumer lenders, including payday lenders, to make ends meet (Lee and Kim 2018; Schafter, Wong, and Castleberry 2009). Today, about 12 million Americans borrow from a payday lender each year, collectively spending more than seven billion dollars on fees and interest (Pew Charitable Trusts 2012). Amid the rise of the high-cost, small-dollar lending industry (hereby referred to as payday lending), scholars have investigated the link between the use of high-cost credit and consumer wellbeing.

Payday loans can be helpful to smooth consumption and manage emergencies (e.g., Dobridge 2016; Servon 2017), particularly among individuals with limited liquidity (Dobridge 2016; Wilson et al. 2010). But the financial benefits of payday loans are short-lived (Gathergood, Guttman-Kenney, and Hunt 2019). In the long run, payday loans can contribute to additional financial strain (Bhutta 2014; Bhutta, Skiba, and Tobacman 2015). For example, the typical payday borrower takes on additional debt through credit cards and personal loans, holds more debt in default, and is more likely to experience trouble paying bills or bankruptcy in the months after relying on a payday loan (Agarwal, Skiba, and Tobacman 2009; Gathergood, Guttman-Kenney, and Hunt 2019; Skiba and Tobacman 2019). Although the direction of the relationship between high-cost borrowing and economic distress is not always established clearly, research generally finds payday borrowing to be associated with economic distress, food insecurity, and take-up of food assistance benefits (Chang 2019; Fitzpatrick 2024; Melzer 2018). The negative impacts of payday loans, however, are likely accrued through repeated use (Montezemolo 2013) as borrowers typically borrow payday loans several times a year to cover routine expenses (Baradaran 2015; Stegman 2007).

Given the largely negative consumer welfare impacts of payday lending, much research has centered on explaining when and why borrowers choose payday loans, often through a structural or behavioral economics lens.

Structural Explanations of High-Cost Credit Use

Since the 1970s, American families have faced wage stagnation, precarious work conditions and limited protection, stagnant or declining living standards, rising single parenthood, and increasing income and wealth inequality (Duncan and Murnane 2016; Piketty and Saez 2014). As the financial lives of American families, and, particularly, low-income American families, become characterized by precarity, uncertainty, and unpredictability (Morduch and Schneider 2017), debt has increasingly become a tool for affording basic needs in the short term (Krippner 2017).

Within this broader context of economic inequality and uncertainty, institutional systems of credit surveillance classify, score, and monitor consumers, shaping their access to financial products (Guseva and Rona-Tas 2019; Lauer 2017). Much research, particularly in the field of sociology, has documented how these institutional systems exclude low-income and nonwhite individuals from mainstream financial services and credit (e.g., Cohen-Cole 2011; Dwyer 2018; Faber 2019, 2024; Fonseca 2023; Small et al. 2021). As access to safe and affordable credit lines through traditional banking institutions decreases, it creates demand for high-interest credit products through alternative financial services (Prager 2009; Servon 2017).

A structural vein suggests that payday loans are used as a “last resort” when no other public or private alternative is available. Empirical studies have lent support to this view: the typical borrower takes out a payday loan when their liquidity is at its lowest and few alternatives are available due to low credit scores, maxed out credit cards, or limited access to mainstream credit (Bhutta, Skiba, and Tobacman 2015; Fonseca 2023; Lee and Kim 2018). In addition, studies documented a relationship between payday lending and inadequate provision of public support to lower-income families (Bea, Amorim, and Friedline 2023; Fairbanks 2019; Prasad 2012). Conversely, reliance on high-cost loans declines as other options to access money become more available including, for example, access to plasma centers to sell blood (Dooley and Gallagher 2024).

Overall, payday borrowing is situated within marked structural constraints—e.g., increasing stratification of consumer credit products through discrimination by banking institutions, lack of local access to safe and sound credit, and strict underwriting processes that require strong credit histories (Baradaran 2015; Faber 2019; Faber and Friedline 2020; Fourcade and Healy 2013). Structural lenses suggest that payday lenders are predatory services that take advantage of vulnerable consumers who lack access to lower-cost alternatives to make ends meet (Bullock et al. 2020; Charron-Chénier 2018; Fuentes 2009; Servon 2017). On its own, however, a structural perspective may inadvertently diminish payday borrowers’ agency and cannot fully explain borrowing behaviors, as we detail next.

Behavioral Explanations of High-Cost Credit Use

In contrast to a structural perspective, payday lenders argue that borrowers actively choose to use payday loans because it is a “straightforward and convenient” alternative to other short-term credit products (Advance America 2012:5). Although industry reports may be met with skepticism, there is also empirical evidence that the payday industry is used as an “complement” rather than an “alternative” to mainstream services (Bea 2023; Friedline 2020) and that many payday borrowers do have liquidity available on their credit card the day they choose to take out a payday loan (Agarwal, Skiba, and Tobacman 2009).

Given evidence that payday borrowers may actively choose high-interest loans over lower-cost alternatives, many economists and consumer scientists have sought to explain the processes behind these choices as resulting from behavioral biases. For instance, experiences of scarcity and urgency of needs among low-income individuals may tax their cognitive abilities, promote present bias (i.e., tendency to heavily discount future costs in favor of present needs), and lead to suboptimal financial decisions such as high interest borrowing (e.g., Mullainathan and Shafir 2013; Prager 2009; Schilbach, Schofield, and Mullainathan 2016; Servon 2017). Lack of financial literacy and overconfidence in ability to repay loans have also been common culprits for payday borrowers’ economic choices (Agarwal, Skiba, and Tobacman 2009; Lusardi and de Bassa Scheresberg 2013). Relatedly, research has found that receiving financial education decreases the chances of relying on high-interest debt (Lusardi and de Bassa Scheresberg 2013; Mottola 2013).

Taken in isolation, studies investigating borrowing choices from behavioral and cognitive perspective ultimately contribute to the view of payday borrowers as short-sighted or uninformed consumers who urgently need money and fall prey to predatory practices (Koku and Jagpal 2015; Rowlingson, Appleyard, and Gardner 2016). Despite growing evidence of low-income families’ resourcefulness in stretching each dollar to make ends meet (e.g., Edin and Shaefer 2015; Morduch and Schneider 2017), these behavioral perspectives may place the responsibility for borrowing behaviors on borrowers’ “failings,” a framing that is so widespread that it is observed even among payday borrowers themselves (Brown and Woodruffe-Burton 2015; Brown, Apostolidis, and Farquhar 2021).

Relational Explanations of High-Cost Credit Use

To date, the literature on payday borrowing has failed to incorporate a relational approach to understanding borrowers’ behaviors. From the relational work perspective, all economic transactions are “fundamentally social interactions” (Zelizer 2012:149) because they are embedded in, shaped by, and constitutive of ongoing social relationships. This focus on social embeddedness differentiates a relational perspective from others and, in particular, from perspectives in behavioral economics. For example, although behavioral economists and relational sociologists both consider money to be non-fungible, behavioral economists foreground cognitive organization and individual decision rules (e.g., “mental accounting” literature; Thaler 1999), whereas relational scholars highlight the social and moral negotiations surrounding economic choices.

Under a relational approach, borrowing is understood through its social dimensions—the social ties, moral expectations, and cultural meanings in which they occur. “Relational work” is a core process in explaining how economic actions become social; it refers to decisions to enact specific social roles, affirm socially significant relationships, build specific social identities, and meet expectations in one’s social circles while participating in economic exchanges (see Bandelj 2012, 2020; Zelizer 2012). Take the example of parents. Parents’ desire to affirm relationships with children and their social identity as supportive parents shapes their borrowing behaviors (Napolitano, Pacholok, and Furstenberg 2014; Zaloom 2019). For example, parents may refuse to settle debt acquired for their children’s education (Polletta and Tufail 2014), incur costly debt to protect their children’s college savings (Soman and Ahn 2011), and proactively create and contribute to financial accounts to reduce future debts for their children (Bandelj and Grigoryeva 2021).

Relational work extends beyond parents to all individuals as they actively center social meanings in economic transactions (Zelizer 2012). This includes credit transactions: prior research shows that individuals make trade-offs between financial and social costs when borrowing, supporting the notion that they are engaging in economic reasoning that is fundamentally social. For example, although individuals are more willing to borrow from social networks when costs of loans in the market become too high (O’Brien, Hayes, and Kiviat 2022), much research documents a preference for incurring financial costs and managing one’s debt privately to protect important relationships from financial stressors (Campbell and Pugliese 2022; Tach and Greene 2014). As another example, a recent qualitative study on informal borrowing among low-income individuals finds that, when borrowing from family, participants were not only worried about straining their personal relationships but also about their reputation and their self-image (Chanda et al. 2026). Similar trade-offs have been documented in lending behaviors as people may either acquire debt to help significant others or conceal their ability to lend (Pugliese, Le Bourdais, and Clark 2021; Rossman 2014), give gifts disguised as loans to protect others’ dignity, or sever relationships if a loan goes unpaid (Wherry, Seefeldt, and Alvarez 2019). Finally, some research also suggests that individuals may be willing to incur financial costs to make transactions in less socially costly environments—e.g., in institutions where they perceived themselves to be better treated (Wherry and Chakrabarti 2022; Wherry, Seefeldt, and Alvarez 2019).

A relational account focuses not only on social relationships, but on social processes more broadly defined. For example, engaging in “earmarking” (i.e., creating social distinctions among categories of money; Sussman and O’Brien 2016; Zelizer 1994) or “relational accounting” (cultural and social processes used to organize, evaluate, justify financial activities; Wherry 2016) positions monetary decisions not only within the context of specific relationships, but also in contexts that are “culturally meaningful and collectively enforced and in overarching moral structures” (Bandelj, Wherry, and Zelizer 2017:59). Thus, for example, certain moments in a person’s life cycle may be imbued with social meaning that shapes their economic decisions with funds allocated for those purposes, such as college savings or savings for retirement (Hayes 2019; Polletta and Tufail 2014).

Overall, a relational approach explains economic decisions (including borrowing decisions) as embedded in social and cultural processes rather than simply economic calculations (Bandelj 2020; Bandelj, Wherry, and Zelizer 2017; Carruthers and Ariovich 2010; Fourcade and Healy 2013; Wherry 2016; Zelizer 1985, 2012). In doing so, it complements structuralist and cognitive perspectives (Bandelj 2020; Zelizer 2012). It also helps to overcome deficit-based biases, and helps to demystify commonly held beliefs that payday borrowers lack options, information, or judgment.

The Temporal Dimension of High-Cost Credit Use

Time is a relatively underexplored yet critical dimension of relational work in debt decisions. In addition to being a coordinating framework which imposes structure and boundaries to economic exchanges, time represents a key aspect of relational work (Hayes 2024). As individuals manage temporal dimensions of an economic transaction to meet relational expectations, time itself becomes a relational tool that can be central to meaning making (Hayes 2024). As Hayes (2024:633) puts: “When we choose to engage (timing), how long we participate (duration), in what order (sequencing), what tempo we set (pacing)—these efforts, too, are calibrated to the social and economic expectations of specific relations.” This may be important in individuals’ decision to borrow from a friend or from a payday lender. For example, borrowing from a friend offers more flexible repayment timelines (including, potentially, grace periods), shifting or renegotiating these timelines have social consequences (whereas they can create empathy and connection, they can also strain the relationship). Payday loans, on the other hand, offer a short and predictable, albeit generally non-negotiable, repayment schedule.

Importantly, time matters not only as a content of negotiation or a container of structures, but also as a framework through which decisions are made. In other words, cultural, moral, and social valuation of the past, present, and future (notions of history) are accounted in economic decisions (Hayes 2024). For example, economic activities may be shaped not only by immediate needs or incentives but also by temporal orientations, future expectations, and previous experiences (Bourdieu 2005; Hassard 1990). These temporal narratives may add meaning to economic decisions. For example, as previously mentioned, salient life-stage milestones such as retirement or higher-education may impact the timing and pace of certain economic transactions (Hayes 2024; Wherry 2016).

Given that social identities are a key part of economic decisions within a relational account, and given that economic activities are shaped by temporal orientations and expectations, time also matters in economic decisions as an individual constructs their own social identity not only in the present, but also by imagining their future selves (Beckert 2016). These imagined futures, although fictional and contingent, are socially constructed and shaped by collective morals and cultural narratives. These imagined futures also tend to be optimistic—and more so for those who face structural constraints (Frye 2012; Suckert 2022). For example, in the United States, the “American Dream,” represents a dominant cultural narrative, an idealized and hopeful vision of upward mobility and economic security, which influences individuals’ economic behaviors, investment decisions, and usage of monetary tools (Beckert 2016).

In the United States, credit scores are increasingly critical for achieving upward mobility. Credit scores are determined by past credit use and repayment behavior and function as a heuristic for determining an individual’s creditworthiness (Fourcade and Healy 2013). In recent decades, these scores have become key screening mechanisms for an array of social and economic opportunities, including access to rental housing, mortgages, insurance, and employment (Kiviat 2019). Not all credit products factor into scores; indeed, payday loans are typically not included in these scores (Bhutta 2014). But individuals who want to build or protect their credit scores for future goals like homeownership may assign special significance to products that do influence scores, like credit cards. This may lead to what Kraemer et al. (2024) call “fictional earmarking,” wherein certain credit products may be preserved for uses that advance larger social and financial goals tied to credit scores, even if those goals may not ever be attained (see also Beckert 2016).

Overall, attending to the temporal dimension of high-cost credit use may unveil how borrowing decisions are shaped not only by immediate relational concerns but also by how individuals envision and work toward their futures. Practices such as fictional earmarking underscore how even costly borrowing can be embedded in long-term planning. By fore-grounding the temporal dimensions of relational work, we aim to broader scholarly understanding of high-cost borrowing within borrowers’ longer aspirational trajectories and planning.

Methods

Recruitment and Sample

To be in the study, participants had to: i) be 18 years or older; ii) have taken out at least one payday loan in the last two years; and iii) speak English. The respondents were recruited from metropolitan areas in seven states (California, Florida, Rhode Island, South Carolina, Oregon, Wisconsin, and Washington). Though we do not make comparisons across geographic regions, we chose these because they represent important variations in the payday industry’s legal landscape. Recruitment of participants took place from July of 2020 to September of 2022, through Craigslist, Qualtrics, and Facebook announcements.

Table 1 summarizes the key characteristics of the 40 respondents in our sample at the time of the interview. About half of our respondents were women, about one-third identified as white, half were married or partnered, half lived with co-resident children, and nearly three-quarters had at least some college education. Almost all respondents were “banked,” i.e., had at least a checking account, and most were working (either part-time or full-time) at the time of the interview.¹ About one quarter of our sample reported annual household incomes under $25,000 and only about 15% reported annual household incomes over $75,000. The median reported household income in the sample was $42,000. Slightly less than half of our sample received some kind of income, housing, or food assistance from the government. In terms of payday loan use, one-quarter of our sample had only borrowed from a payday lender one time. Payday loan sizes ranged from $100 to $1,500, with a median amount of $400. The median fee amount was $50, though respondents reported fees from $25 to $150. Nine of our respondents had some amount due to payday lenders—not because their loans were recent, but because they had been unable to repay their loans on time.

Table 1.

Sample characteristics at time of interview.

Characteristic	Number	Percentage
Mean age	41.5
Female	18	45%
Race
White	13	33%
Black	9	23%
Hispanic	11	28%
Other	5	13%
Undisclosed	2	5%
Partnership status
Married	11	28%
Cohabiting	10	25%
Not partnered	19	48%
Coresident children	19	48%
Educational attainment
College	9	23%
Some college	18	45%
High School or less	8	20%
Undisclosed	5	13%
Working full time	18	45%
Working part time	14	35%
Not working	8	20%
Median household income (dollars)	42,000
Distribution of household income (dollars)
<24,999	10	25%
25,000–49,999	13	33%
50,000–74,999	8	20%
>75,000	6	15%
Not reported	3	7%
Receives public assistance	17	43%
Income Assistance	11	28%
Housing Assistance	3	8%
Food Assistance	13	33%
Median number of Payday loans	3
Median amount borrowed (dollars)	400
Median fee paid (dollars)	50
Distribution of Payday Loan use
1 Payday loan	10	25%
2–3 Payday loans	15	38%
4–5 Payday loans	2	5%
5+ Payday loans	11	28%
Has a bank account	39	98%

Note: = 40.

Our goal in recruiting a diverse sample was not for representativeness, but for capturing diversity of experiences. Although this sample is not meant to be representative of payday borrowers, respondents’ characteristics align with those described in work that draws on secondary survey data, which finds that payday borrowers tend to be disproportionately nonwhite, and the majority are married, have some college education with typical incomes below $50,000 (see, e.g., Bolen, Elliehausen, and Miller 2020; Charron-Chénier 2018; Friedline 2020). In fact, a report from Pew Charitable Trusts (2012) suggests that the odds of payday loan usage are 62% higher for those earning less than $40,000 annually than for those earning more. Notably, despite having a diverse sample, we do not compare sub-group of respondents across characteristics such as income, payday loan use frequency, or payday loan size. We consider this investigation beyond the scope of our work, which aims to compare respondents’ perceptions and decisions regarding payday loans vis-à-vis other financial products and find similarities across their rationales despite differences in their backgrounds.

Data Collection and Analysis

We follow previous research on debt (see Tach and Greene 2014) by using a qualitative approach to describe payday borrowers’ own understandings of themselves, their personal stories, and the contexts in which they made prior financial decisions. Our interview guide contained open-ended questions about borrowers’ current and past finances, experiences of financial hardships, and resource allocation. It also incorporated questions about how respondents learned about financial management, what financial decisions are common in their social circles, and which people were involved in or affected by the borrowing decisions. We specifically ask about decision-making regarding payday loans as well as the decision to use or not use potential alternatives. Although we asked respondents about a range of ways to access cash (including over-drafts, public assistance, and loans from banks), our results will compare payday lending to three alternatives that were most considered by respondents: borrowing from family and friends, withdrawing from savings, and using credit cards. Our respondents generally did not consider bank loans, overdrafts,² or public assistance as a reasonable alternative to payday loans (see also Friedline 2020; Servon 2017).

In-depth semi-structured interviews were conducted by the authors and a trained research assistant, mostly in pairs, with one person taking contemporaneous field notes. Interviews were scheduled at a convenient time for participants, and all were conducted via phone or Zoom given public health guidelines during the Covid-19 pandemic. Interviews’ length ranged from 75 to 120 minutes and respondents were compensated $40 for their time. All interviews were audio-recorded, transcribed verbatim by a professional service, and read in full by all researchers.

Interviews and field notes were analyzed using NVivo software using a contemporary iterative approach combining inductive and theory-based coding at the paragraph level (Deterding and Waters 2021). Recruitment and interviewing took place over three distinct periods: (1) Summer and Fall of 2020 (n = 16); (2) Spring, Summer, and Fall of 2021 (n = 18); (3) Summer 2022 (n = 6). An iterative approach combined with these distinct rounds of recruiting allowed us to refine the interview guide as new themes emerged (Small and Calarco 2022). For example, as reports of concerns about own credit scores and mobility emerged consistently during the first round of interviews, we added and tested explicit questions about this theme to the interview guide for subsequent interviews. Conversely, some other questions—such as those about specific welfare programs or pandemic-related stimulus checks—were dropped in the last round of interviews (conducted in 2022) as they became less contextually relevant (because the effects of the pandemic waned) or because no clear theme/connection with payday borrowing had emerged until that point. Although these adjustments to the interview guide mean that not every piece of information is consistently collected from all respondents, this common practice allowed us to pursue emerging and novel themes (Small and Calarco 2022).

Researchers independently coded all interviews, wrote analytic memos describing emerging themes, and compared notes to identify and discuss any discrepancies. After conducting 34 interviews (by the end of the second round of data collection), the research team believed that no new themes were emerging on questions about motives, reasoning, and consequences of payday borrowing. The last round of recruitment (which took place in the summer of 2022) occurred when the codebook had been finalized. It allowed us to confirm that we had reached theoretical saturation (Orne and Bell 2015)—i.e., we found no new information on the interviews conducted with respondents within each socioeconomic classification. At this point, we concluded the data collection process.

Notably, as we analyzed the interview data, we relied on a relational framework and key relational concepts (e.g. social meaning of money, earmarking, monetary and nonmonetary values, negotiation of boundaries, and relational work). In doing so, we focused our attention on how economic actions were both imbued with meaning and directed to others. Arguably, our data could be also analyzed with a different focus—e.g., structural or behavioral/cognitive—to emphasize different facets of economic decision making. Although other frameworks could, indeed, lead to different ways of describing these decisions, we do not believe these alternative descriptions are incompatible with our findings. Instead, they would be complementary. For example, a structural credit-surveillance perspective may highlight how systems of credit monitoring and classification shape consumers’ access to credit and set the conditions under which relational work unfolds. A focus on relational practices such as ours, on the other hand, helps explain how individuals navigate the constraints of credit classification.

Our final data includes information about respondents’ reported borrowing behaviors, perception of available alternatives, and relationships involved in decision-making. Respondents’ accounts may not be accurate due to, for instance, social desirability biases. To address this concern, we requested that participants offer concrete examples of decision points and behaviors, and we responded neutrally or sympathetically to their accounts without expressing any a priori assumptions about the morality of their decisions. Another potential concern is that self-reports may represent post-hoc rationalization of respondents’ behaviors. To address this, we asked respondents in multiple different ways and points of the interview about various borrowing decisions and relationships, which allowed us to identify and address any inconsistencies in their accounts. Notably, although individuals’ narratives of themselves may be biased (Small et al. 2021), individuals’ personal narratives, financial identities, and self-conceptions are believed to shape their actions—even more so than rational calculations or cognitive biases (Ewick and Silbey 2003)—and can reveal how financial decisions incorporate temporal and social considerations. A final concern may regard the context in which we collected our data—during the Covid-19 Pandemic. Although the pandemic impacted respondents’ need to borrow, we do not believe that it meaningfully impacted respondents’ decision to borrow from payday lenders vis-à-vis alternatives for two reasons: (1) many respondents reported on instances of payday use both before and after the pandemic, and analyses of within-consumer themes across instances of payday use did not vary based on the pandemic context; and (2) themes from the last round of interview (Summer of 2022) were in line with those identified during the height of the pandemic (2020 and 2021).

In the discussion of results, we preserve respondents’ confidentiality by using pseudonyms and changing minor identifying details in their narratives. We often identify respondents based on basic demographic characteristics (race, occupation, and education), which are considered important in identifying respondents’ stage of the life cycle or in stratifying the experiences of American consumers (Charron-Chénier 2018; Lusardi and de Bassa Scheresberg 2013). Yet we do not compare respondents across these socioeconomic and demographic categories, as saturation of themes was not pursued or reached along these lines.

Results

Structural and Behavioral Components in Payday Borrowing

A portion of what we aim to uncover is whether interviewed payday borrowers have other options when they turn to payday lenders—i.e., to understand whether they use these loans deliberately or as a “last resort.” To contextualize payday borrowers’ decisions, Table 2 uncovers interviewed consumers’ access to other credit options at the time they borrowed from payday lenders. It reports on the share of respondents who had access to alternative financial products at the time they borrowed from payday lenders. For a portion of our sample (n = 6), borrowing money from family and friends at the time they borrowed through payday lenders was simply not an option because these respondents were part of resource-depleted social networks. Even when borrowing from family and friends was considered an option, many respondents explained that types of loans were only available in small amounts. A large share of respondents also had no or limited savings that would not be enough to cover the value of a payday loan (n = 16). Finally, many respondents did not have credit cards or had “maxed out” their credit cards (n = 14) at the time they borrower from payday lenders. Although our respondents had constrained options, in line with structural perspectives on payday lending, we also find that, nominally, all respondents in our sample had at least one alternative to access credit when they borrowed from payday lenders. This suggests that structural constraints alone do not explain their decision-making.

Table 2.

Availability of payday loan alternatives.

Alternatives to Payday Loans	Number	Percentage
Social Networks	34	85
Savings	24	60
Credit Cards	26	65
At least one option	40	100

Note: = 40.

In their narratives, payday loans were not truly their “last resort.” As Joseph (63-year-old male, White, currently unemployed) explains: “It’s kind of weird. It’s a last resort. But it’s a first resort.” Like borrowing from family and friends, savings, or credit cards, payday loans can be accessed quickly and easily, but they also offer their own advantages, which sometimes make respondents like Joseph feel justified in spending “a couple [of extra] bucks here and there” in fees. Joseph understands that there are financial costs to payday loans, but the perceived advantages of payday loans, as we show later, reveal why individuals may intentionally choose financially costly options, providing new insights on financial decision-making that traditional behavioral approaches (e.g., limited formal financial education, and urgency of borrowers’ needs) cannot fully explain. For example, we find that nearly three-quarters of our respondents understand that payday loans are objectively more costly than alternatives and one-quarter of them are willing to use payday loans even for non-urgent needs (such as leisure or gifts).

As we show next, in our data, payday loans are portrayed as another useful tool in the portfolio of economically insecure individuals, an option that they actively sought out and balanced with other existing alternatives. In the sections below, we show how payday loans were not simply instruments of desperation but part of broader strategies of identity management and future planning. First, we emphasize payday loans as a way to protect one’s present social identity—allowing borrowers to avoid shame, preserve independence, and shield relationships from strain by not asking family or friends for help. Second, we focus on the notion of future self-reliance, showing how borrowers used payday loans to preserve their savings as a “security blanket” against uncertainty and to maintain dignity and preparedness for future crises or obligations. Finally, we will show how individuals frame payday loans as tools for fostering aspirational futures, where borrowers linked their credit choices to long-term goals of homeownership, upward mobility, and providing for children.

Self-Sufficient Identity and Payday Borrowing

Prior research has underscored the importance of relational work in shaping economic decision-making. In the context of payday lending, this often meant preserving a self-sufficient identity—maintaining an image of independence while also protecting valued relationships. Consistent with other studies on the financial decision-making of lower-income individuals, our findings show that borrowers frequently preferred payday loans to asking for help from friends or family. For many, payday borrowing was not simply about access to cash but about safeguarding their identity as self-reliant individuals to maintain current relationship boundaries.

Jennifer, a 47-year-old White single mother who lived with five roommates, illustrates this dynamic. After losing her income early in the Covid-19 pandemic, she received $500 from an old friend. She acknowledged the financial benefits of borrowing from friends compared to payday loans: “there’s no interest rate and, like, paying the, the amount of time that they [friends] give you to pay them back is flexible.” Yet Jennifer emphasized that turning to one’s social network was reserved for moments of complete “dire straits,” such as if “I was in a situation where I was going to lose my home.” At the time, her lack of income prevented her from accessing payday credit, but when possible, she—and many others—preferred the latter.

Although payday loans carry steep financial consequences, respondents often judged them to be less costly than the social and emotional burdens of borrowing from loved ones. Because self-sufficiency is a deeply valued cultural trait in the United States, borrowing from friends or family almost always triggered feelings of shame and inadequacy. Jennifer and others described such experiences as “awkward,” “embarrassing,” or “humiliating.” Dimitrius, a 61-year-old college-educated African American business owner, explained that when he needed help paying electrical bills, he turned to payday lenders because “I didn’t want, I don’t like my family to see that I’m in, that I’m in a situation to where I’m not financially able to take care of myself and my family.” Similarly, Park, a 53-year-old Asian retired police officer who used payday loans to support a gambling addiction, said, “when borrowing from family, man, I mean, it makes you feel low, gives them an insight on your financial needs.”

Payday loans were thus often viewed as worth the financial cost because they helped protect both relationships (respondents were acutely aware of others’ financial struggles and the strain repayment might impose) and, importantly, borrowers’ sense of self-sufficiency. Zuri, a 31-year-old Black single woman who worked as an administrative assistant, described why not relying on family or friends mattered: “I don’t like asking for help [from kin]. Really, I like to be independent. […] I think for someone my age, I should be, I should be financially comfortable.” A couple of years before our interview, Zuri was late paying her rent and feared eviction. Although skeptical of payday lenders, she still preferred them over kin to cover the shortfall, believing she could do so because she was financially responsible: “I don’t I know, like, I don’t have any bad issues. I don’t have any bad credit or anything like that. So, I just could take the chance [of taking out a payday loan]. And I did it.”

Others echoed this link between payday borrowing and independence. Anthony, a 41-year-old African American single man earning a six-figure salary, turned to a payday lender during the onset of Covid when his paycheck was delayed. He equated using payday loans, rather than asking others for help, with “try[ing] to be a responsible adult and you handle it yourself.” Similarly, Payton, a 33-year-old Black single mother working in the service industry, explained that payday credit was itself an enactment of independence: “Being raised up independent on my own, I rather come up with it on my own without the worry about other people And other people in my, like, personal, you know, business area. I get it myself. So that’s the type of person I am. I’m independent. If I can get it, I’m gonna get it [payday loans].” Javier, a 37-year-old Mexican American contractor for a security company, also described how borrowing from social networks threatened his independence: “kind of noticed that when I ask people for money, people are like, kind of hesitant, or they’re like, oh, like, you must be doing bad.” To avoid this, he decided it was worth using payday loans: “I’m just going to stick to my guns and I’m going to survive on my own. I’m gonna have to do what I need to do on my own.”

Overall, respondents sought to manage not only their finances but also how they were perceived within their social networks. Respondents often referenced acute economic hardships (e.g., job loss or delayed paychecks, inability to pay bills or rent) that precipitated borrowing, which underscores the structural conditions in which these decisions were embedded. At the same time, they were highly attuned to the possibility that borrowing from kin could invite intrusive questions or unwanted judgments about their economic lives. In weighing these relational risks, many chose the relative privacy of payday lending—an option that met immediate needs while preserving their self-sufficient identities. As Javier explained, in this context, payday loans “serve a purpose,” which is not always economic. We find, in fact, that payday loans are used as a shield against shame, judgment, and relational strain, allowing borrowers to maintain independence in the eyes of others. In other words, payday loan use became part of their ongoing relational work to maintain boundaries between their financial needs and their relationships with friends and families, where they would like to be seen as self-reliant and independent. Joseph noted that payday loans are last resort but also a first resort; friends and family, in contrast, may be true a last resort for financial support, to assist when one is in “dire straits” when options like payday loans are not sufficient.

Using Payday Loans to Preserve Future Self-Reliance

In a context of widespread economic insecurity, borrowing behavior and credit choice were shaped not only by respondents’ immediate presentation of self but also by their imagined futures—their anticipated social relationships, identities, and aspirations for upward mobility. Here, in contrast with the prior section, we show that payday borrowing was often paired with deliberate efforts to conserve savings, which respondents framed as essential for long-term security, dignity, and preparedness. Here, payday loans were not just a means of protecting one’s social identity but also a strategy for safeguarding savings to weather future crises and preserve future independence.

About half of interviewed borrowers had some money set aside—ranging from dozens to thousands of dollars—even at the time they took out payday loans. While behavioral economists have treated this co-holding of high-cost loans and savings as a “puzzle” (Agarwal, Skiba, and Tobacman 2009), respondents explained it as a deliberate choice: payday loans allowed them to preserve their savings as a reserve for future emergencies and, in turn, to preserve their future self-reliance. Savings were widely described as a “security blanket,” a source of “peace of mind,” and a buffer against uncertainty. Respondents earmarked savings for unpredictable events such as car breakdowns, hospitalizations, or funerals. Yet, when faced with pressing needs, many avoided dipping into those reserves, opting instead for payday loans.

Take the case of Alejandro, a 28-year-old Hispanic truck driver, who took out a payday loan to replace his car after an accident, even though he had $3,000 in savings. He explained: “because I knew that I just started living in a new place. And that [savings] wasn’t going to be as much just to cover my expenses. So, I needed to make sure that my savings are intact, because who would have known the situation? How [it] was going to change or how this year was going to be?” His instincts proved accurate: shortly afterward, the Covid-19 pandemic caused severe income volatility. Reflecting back, he said, “Seeing the circumstances? I’m glad I didn’t [use my savings] because it would have been very much more difficult to obtain that money [from a payday lender] now than before.” Alejandro’s experience illustrates why some payday borrowers considered better to borrow from a payday lender in the present (despite associated costs) to keep their savings intact for an unpredictable, potentially more structurally constrained future, when maybe not even payday loans would be available.

Other respondents echoed this theme. Beth, a 47-year-old Hispanic photographer with three children, linked her savings directly to her ability to weather difficult times: “you have to be good at managing your money, you have to be good at a lot of different things, you have to take into consideration that there are good times and bad times. So you have to, like, save for the rainy day.” For Beth, savings were both evidence of current independence and a guarantee of future independence. To maintain this security, she often ignored her savings when borrowing: “I like to pretend that, I like to pretend that I have no money.” Similarly, Matias, a 47-year-old Hispanic man, and Carla, a 38-year-old Hispanic woman, emphasized that payday debt was preferable to exhausting savings, despite acknowledging the higher costs associated with this type of debt. As Matias explained, “depending on the circumstances you want just money there just to have in case you do need to pay other bills, too.” Carla added: “And then, if, God forbid, something happens, and I need that money from my savings, it’s gone.” For these respondents, payday loans served as a mechanism for holding savings in reserve. They were willing to pay fees to ensure they had savings and the possibility of future self-reliance.

Although the decision to take out a payday loan when savings are available is certainly not optimal in an economic sense, our findings suggest that savings carried symbolic and social weight beyond their monetary value. Preserving savings meant preserving preparedness and independence in the future—being ready for an undescriptive emergency, when maybe other options (including payday loans) would not be available.

Yet, preserving savings also meant fostering a sense of dignity and enacting socially valued identities. Saving requires effort and commitment—perhaps more commitment than paying back a payday loan. As Payton explains: “you save up for 20 years, you could blow through savings in a year.” As a result, many respondents saw their savings as untouchable, unless for the right reasons. These reasons could be an unforeseeable future crisis, but also other worthy—and often relational—reasons. For example, for many respondents in our sample, reluctance to use savings typically applied mostly to their own emergencies. While few reported taking payday loans to help others, many were willing—and even proud—to use their savings for that purpose. Juan, for example, pretended to “have no money” in savings when he took out a payday loan for basic needs. Yet, at the time of the interview, he planned to give a large portion of his savings to his younger brother, who was purchasing his first home: “I’m gonna, I want to give him $1,000 you know, just for that, you know, cuz he’s like, he’s young. And I don’t, I’m not a homeowner, I hope to be but he’s, obviously he has like a better career than I do. […] but I’m like, you know what, just because I’m the big brother.” For Juan, providing this support affirmed his identity as a responsible older brother. Even though he may have had to use payday loans for his own needs, maintaining his savings untouched enabled him to fulfill this valued social role. This example illustrates how consumers may rely on payday loans to protect savings, not only because they believe savings allows them to be self-reliant and prepared for future emergencies, but also because savings may allow them to enact specific social identities. Yet, this same example also illustrates how efforts to uphold valued social roles in the present could undermine strategies to protect future self-reliance, revealing the tensions and trade-offs borrowers often faced in balancing competing temporal and relational goals.

Overall, payday loans were not simply tools of last resort but part of a broader strategy to manage uncertainty and protect the possibility of future self-reliance. Borrowing from payday lenders has less emotional burden than dipping into savings, which are tied to future goals, aspirations, and comfort. By insulating savings for hypothetical emergencies or to meet obligations to others, borrowers used payday credit to secure their long-term identities as independent and reliable adults.

Using Payday Loans to Foster a Better Future

In contrast to the first two sections, here we show how borrowers frame payday loans as tools for fostering aspirational futures, where they linked their credit choices to long-term goals of homeownership, upward mobility, and providing for children. Unlike the second section, where savings (and a cushion against future crisis) were the protected asset, here it is respondents’ perceived future financial standing (and their potential for mobility) that is at stake.

When asked where they see themselves in five years, nearly all payday borrowers had optimistic visions for themselves. This was true regardless of borrowers’ income or educational attainment (despite research suggesting that individuals with lower socioeconomic status may be more optimistic (e.g., Bandelj and Lanuza 2018; Frye 2012). Our respondents stated, for example, that “Five years from now, I should be a homeowner,” “there should be no need for me to go to a loan institution,” “I should be doing better,” or “I’ll have reestablished credit and be well on my way toward the 700 [credit score] again.” They shared aspirations for social mobility which often included buying homes, achieving financial stability, paying off debt, saving money, and retiring independently. In this context, payday loans often emerged as a pragmatic option to meet immediate financial needs without jeopardizing their imagined future selves (Beckert 2016; Frye 2012; Suckert 2022).

Instead of being short-sighted, payday borrowing was often based on long-term plans, drawing on their optimistic visions of their economic futures. For example, when borrowers used payday loans and “ignore” their savings, some were protecting funds for a future emergency, but others were protecting their “nest egg” for retirement or a future home purchase. This fictional, or imagined, earmarking became especially important when respondents were deciding whether to use credit cards or payday loans. After all, most of our respondents accurately saw a credit card’s role in establishing social standing as distinct from other borrowing alternatives, like payday loans, because of how credit card debt is incorporated into credit scores. As Aaron, a 32-year-old African American single male with some college education, explains, “[good credit] is something that is important for like financial flexibility […] It’s just like, easy to do things with good credit.” Matthew (White, married, 57-year-old, mechanic) also succinctly captures this knowledge: “The thing I have learned is that a credit card is like a loan from a bank. It affects your credit rating, and it affects your future credit situations. So, it’s necessary to treat it very carefully.” Thus, respondents like Krista, a 47-year-old White woman who had some college education and worked as a grocery deliverer, saw improving credit scores as essential to achieving their future goals: “If I’m going to get us [my family] a home, at some point, I have to get my credit score up.” Similarly, Rita explains, “I have a thing with trying to make sure my credit is a certain way, because of my future. Like, the house that I would love to buy in the future. So, I make sure I pay those credit cards.”

On the other hand, several respondents did not explicitly link payday loans to credit scores³—a perception that is generally correct (see Bhutta 2014). Kai, a 32-year-old married Native American, explained his choice to use a payday loan over a credit card: “[my] credit card limit was reaching its max where, obviously, with building home credit, I’m trying to minimize usage. So, in this case, […] I just thought it’d [payday borrowing would] be the easiest route to go with.” At the time she took out a $800 payday loan, Rita was also trying to “budget [her] credit” to avoid increasing the balance on her credit cards. She had an eye toward the future—except not only her own, but also that of her children: “I’m also thinking about the future, like, you know, like, trying to, like, make sure my credit’s good for the future for my, to get a home for my kids and everything.” After receiving an unexpectedly expensive heating bill, Carla also opted to borrow $500 through a payday lender instead of her credit card because she wanted to keep a low credit card utilization ratio to improve her credit scores:

I never wanted to go over, like, that certain amount on my credit card. […] Because, then you’re gonna start racking up your credit card debt. And, you don’t want to do that. And, I didn’t, didn’t want to change like my, my, my ratio, my utilization on my credit cards and affect my credit score, just in case, like, I had to go in and potentially take a loan out to do some stuff, or anything like that. So, I’m always trying to be conscientious of that.

Although Carla’s, Rita’s, and Kai’s decisions to rely on high-interest lending instead of credit cards may not have been economically efficient, it was not short-sighted: they perceived the potential long-term consequences of damaging credit scores through credit card debt as more severe than the high financial costs of payday loans. When asked to compare negative consequences of not paying the balance of a payday loan versus credit card, Matthew (the mechanic) easily lists the more severe potential consequences of credit card debt: “Damage to your credit report. Higher loan versus credit position on your credit report. And in the future you could be denied a bank loan, access to a bank account, an apartment, a job because of your credit rating.”

Respondents’ future-oriented strategies incorporate both their knowledge of the consequences of poor credit scores and the financial costs of payday loans to move us beyond behavioral explanations of borrowing tied to short-sightedness or lack of financial literacy. Rather, protecting one’s credit scores is a type of intentional relational work given that borrowers account for how they will be perceived by their social community, whether they will be able to achieve socially desirable goals (e.g., home ownership), and how these decisions impact their loved ones (e.g., the future of their children). Overall, the potential social and financial consequences of damaging credit scores through credit card debt were often considered more severe than the high financial costs of payday loans. Using payday loans, though financially costly in the near-term, allowed individuals to maintain a strategic use of credit cards and protect their savings-two financial choices that prioritized social mobility over the long term.

Discussion

In the context of increasing economic inequality and insecurity (Duncan and Murnane 2016; Morduch and Schneider 2017; Piketty and Saez 2014), individuals—particularly low-income individuals—have increasingly relied on consumer credit to make ends meet (Lee and Kim 2018; Schafter, Wong, and Castleberry 2009; Wilson et al. 2010). Our qualitative study uses payday loans, one of the most controversial sources of credit in the United States, as a case study of the relational factors that help explain high-cost borrowing. Payday loans represent an interesting case study in part because prior literature suggests both that payday loans are used as a last resort (when no other alternatives to accessing credit are available) and when borrowers have access to lower-cost liquidity but lack financial literacy or bandwidth to make optimal financial decisions. Overall, our study complements existing structural and behavioral explanations of high-cost credit use by underscoring credit decision-making as also relational.

In our sample, all borrowers had at least one quick and easy alternative to access money when they borrowed from payday lenders: their savings, social networks, or credit cards. Most of our respondents also had enough financial literacy to understand that payday loans were more expensive than these alternatives. Yet very few believed they should have made different financial decisions, even when strict economic calculations would suggest the final decision is not financially optimal. Ultimately, interviewed borrowers turned to payday loans not only to resolve immediate financial shortfalls, but also to manage their social identities, social relationships, and imagined futures: protecting their self-sufficient image in the present, preserving savings for uncertain emergencies, and safeguarding their credit profiles to pursue long-term goals such as homeownership, stability, and upward mobility. Our findings underscore that high-cost borrowing cannot be reduced to a matter of financial necessity, irrationality, or short-sightedness as borrowers’ decisions are shaped by relational logics (e.g., Bandelj 2020; Beckert 2016; Wherry 2016; Zelizer 2012) within a context of economic insecurity.

First, our findings highlight how respondents framed payday loans as strategies for managing how they were perceived by others. Borrowers used payday loans to preserve a self-sufficient identity in the present, avoiding the shame, judgment, or relational strain that came with borrowing from family and friends, and to maintain current relationship boundaries with their friends and family. Second, payday loans were used as a strategy to manage how respondents envisioned their futures. In other words, respondents’ cultural, moral, and social valuation of the future and their expectations for the future were incorporated in their economic decisions (Bourdieu 2005; Hassard 1990; Hayes 2024). For example, many turned to payday credit as a way of protecting savings earmarked for unpredictable emergencies or obligations to others, thereby securing their sense of future self-reliance. In addition, borrowers relied on payday loans to safeguard long-term aspirations, particularly by protecting their credit scores and maintaining financial resources that would enable social mobility and intergenerational security.

Our study, therefore, raises the possibility that borrowers are pushed toward expensive loans not because of lack of credit alternatives or lack of knowledge but also because of interpersonal relationships, moral concerns, and cultural meanings (Bandelj 2020; Bandelj, Wherry, and Zelizer 2017; Beckert 2016; Carruthers and Ariovich 2010; Fourcade and Healy 2013; Zelizer 1985, 2010). Furthermore, time—and in particular perceptions about the future self—mattered as a key framework through which decisions were made (Hayes 2024). Notably, these perceptions of the future self are relational, i.e., they are socially constructed and shaped by collective morals and cultural narratives (Frye 2012; Hayes 2024).

Although many of respondents’ motivations for payday borrowing are social in nature, they were not without potential economic benefits, particularly in a context where economic uncertainties permeate one’s daily life. For example, the choice to take out a payday loan while there was money in the bank was one strategy used to navigate the many “what ifs” of their near-term futures (see also Morduch and Schneider 2017), allowing respondents to have some funds “just in case” something else came up. Similarly, the choice not to use financial support from social networks can be seen as a strategy to cope with marginalization and insecurity by protecting scarce (but relatively more reliable) social resources for future moments of greater need (e.g., Desmond 2012; Domínguez and Watkins 2003; Stack 1975).

The decision to use payday loans may be economically expensive, but it could also be framed as financially “savvy” or adaptive, particularly in the long term. For instance, under a system of widespread credit surveillance, some respondents opted for costly payday loans instead of credit cards to “perform credit worthiness” to mainstream financial institutions on which later they would need to rely to achieve socially desirable goals (e.g., purchasing a home). Indeed, the impact of poor credit card use on one’s credit scores can result in long-term adverse consequences for one’s employment, housing, future credit access, and social mobility (see Fourcade and Healy 2013; Kiviat 2019; O’Brien and Kiviat 2018; Porter 2008; Thorne 2008). Thus, although present bias (e.g., focus on current needs at the expense of future ones) is often portrayed as a reason why consumers use payday loans, most of our payday consumers were actively planning for the future when they made decisions to use payday loans.

Finally, we find that, at the individual level, payday borrowing in concert with strategies around available alternatives provides a way to protect visions of social mobility and future financial security for those with the least means to achieve these socially valued goals (see also Bolen, Elliehausen, and Miller 2020; Sussman and O’Brien 2016). Case in point, when asked where they see themselves in 5 or 10 years, nearly all interviewees described an optimistic and aspirational vision of their future selves: comfortably retired, owning a house, paying for college. Such optimistic visions of future selves have also been documented in other studies, some of which suggest that hopeful views of the future are likely to develop under contexts marked by scarcity (Beckert 2016; Frye 2012; Suckert 2022). These imagined futures (regardless of their feasibility) are shaped by strong moral narratives in the United States, which emphasize cultural values of individualism and independence and shape economic behavior and usage of monetary tools (Beckert 2016). Our respondents often cited credit cards as carrying a special weight in their decision-making. Many would earmark this product for use under specific conditions (e.g., not exceeding a certain balance) with a goal of protecting their credit score. They instead perceived payday loans as a viable option that would allow them to preserve their future aspirations even as they were trying to manage an immediate financial need. This aligns with the Zelizerian (Zelizer 1994:24) view of earmarking, wherein money “can be transformed from fungible to non-fungible, from profane to sacred.” In this case, payday loans are effectively transformed from costly financial products into “sacred” tools that help preserve future aspirations and maintain desired social identities and relationships.

It is striking that even in times of crisis, these future aspirational goals were part of our respondents’ economic decision-making. At a societal level, given the financial costs of payday loans and limited low-cost alternatives, payday lending may ultimately be another avenue for companies to exploit socially disadvantaged groups. In a financialized economy that prioritizes good credit as a feature of social mobility, we find that lower-cost, mainstream credit products are perceived as less attractive options in moments of acute financial need. In this way, payday lending and other high-cost loan firms are profiting from financial hardship that comes coupled with socially promoted and culturally shared dreams that rely on the preservation of other credit products. Payday lending and other high-cost loan firms thus profit from borrowers’ temporal-relational logic that protects the financial and social resources needed for their imagined future selves. This temporal logic transforms expensive payday loans in terms of immediate costs into a reasonable option when calculated against the potential costs to future social mobility, relationships, and financial opportunities.

This study has important limitations. First, our study relies on respondents’ reports of their financial behaviors, leading to potential social desirability bias when they describe their credit options. Relatedly, we rely on payday users’ reports of credit accrued and support exchanged with social networks. Yet, these accounts may be biased—i.e., interviewees may be more likely to overstate the amount of support they provide and to understate the amount of support they receive. Second, by design, our sample includes only people who have ever used payday loans; thus, we do not have access to the perspectives of people who have refused borrowing from payday lenders and who may weigh the financial and social costs of their decisions differently. For instance, it is possible that payday borrowers are particularly prone to assigning disproportionate weight to social costs relative to financial costs compared to the overall population. Thus, other segments of the population may have opted for borrowing from social networks instead of high-interest lending under similar circumstances. This means that our sample provides insight into decision-making of a sub-sample of the population but does not necessarily represent the average experience of low-income individuals and families.

These limitations notwithstanding, the study provides a path forward for understanding seemingly costly economic choices. In a context that increasingly requires engaging with complex financial products to fully participate in economic and social life (Wherry, Seefeldt, and Alvarez 2019), a relational approach can help scholars better understand when and why individuals make the decisions they do. It helps to bridge the divide between structural and behavioral explanations of financial decisions, especially for economically disadvantaged groups. In an economic context where options are often limited, individuals give careful weight to how choices may affect friendships and family members, and these considerations are often equally—if not more—important as the financial costs of a particular product. In doing so, we contradict widespread deficit-based explanations of suboptimal borrowing that often focus on borrowers’ lack of agency, knowledge, or moral failings.

Overall, our study contributes to a growing literature showing that financial products carry moral and relational meanings and should be studied not only as financial instruments but as socially embedded tools. In doing so, our work reframes common behavioral-economics claims by showing that what may appear to be present bias could instead reflect a future-oriented effort to manage competing temporal horizons, relational obligations, and moral narratives. Our findings expand beyond payday loans and suggest that relational and future-oriented logics may play a central role in other stigmatized and costly credit options (e.g., pawn shops, rent-to-own agreements, buy-now-pay-later products) as economically insecure households pursue pathways to maintaining dignity, avoiding relational strain, and protecting long-term aspirations. More broadly, our study invites scholars to reevaluate assumptions about decision-making in other financial domains (such as retirement savings, student loan uptake, medical debt management), where decisions that appear financially puzzling may instead reflect relational concerns. This reevaluation also need not be restricted to high-cost credit markets but could apply to other areas such as how individuals make decisions about higher and lower paying jobs, about educational credentials, or enrollment in public assistance programs. From a policy standpoint, our findings invite reflection on the much broader support network that ought to be offered to individuals facing pressure to balance present constraints with future aspirations. For example, one may assume that incentivizing savings among lower-income households may substitute for the need and use of high-cost credit. Yet, our findings suggest that savings availability alone will not reduce demand for payday loans within a context characterized by precarity and uncertainty of self and/or one’s networks.

Future qualitative and quantitative research on financial choices should seek to capture the full suite of options available to individuals and elicit non-financial factors that contribute to decision-making. Doing so will help explain and understand when and why individuals make decisions that may not align with commonly held best financial practices. Building on this study, future studies could also investigate the sources of information used by individuals to make these decisions, and also potential heterogeneity within the population of payday users across, for example, income levels, race, education, size of loans and frequency of payday loan use. Finally, we hope our results prompt scholars to consider economic decision-making—particularly among disadvantaged groups—as adaptive responses to broader social conditions wherein immediate economic efficiency may be willingly traded for the opportunity to have rich social, relational, and financial futures. Such a broader understanding should still foster a critical examination of the current financial system, particularly how it forces disadvantaged individuals to choose between unaffordable costs and their aspirations for a better future.