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June 14, 2023

New “Cash Poor Report” Shows Americans Borrowing Money Pay Billions in Junk Fees Beyond APR Rates

It’s no secret that many Americans live paycheck to paycheck. With inflation on the rise, families are doing what they must to make ends meet.

But what happens when an emergency occurs? Many families turn to traditional, soulless financial institutions. With that comes hidden fees and an annual percentage rate (APR) that doesn’t truly reveal the costs to those in need.

President Biden has taken a stand against these so-called “junk fees,” but that is only one piece of the puzzle. The cost of borrowing continues to get more expensive for average Americans.

That’s why we propose a new term for lending, Total Cost Rate. This removes the fluff and deceptive text to provide a real look at what people must pay when dealing with unplanned expenses. Consumers deserve to understand how much borrowing truly costs and what options they have.

To help explain this in detail, we have commissioned a study by research firms Opinium and the Center of Economic Business and Research (CEBR) alongside alternative finance Professor Melody Harvey from the University of Wisconsin as report author to determine the total cost of borrowing from common options to cover unplanned expenses. This report looks at “cash-poor” households, those that live paycheck to paycheck, and includes a sample size of 2,000 U.S. adults.

Below, we will cover key findings, including financial profiles, the true cost of unplanned expenses, and what families are doing to cover unplanned expenses.

Who are these Americans?

It’s important to understand exactly what is meant by “cash-poor.” As mentioned, it means Americans living paycheck to paycheck.

These are everyday, middle-class people who manage to keep their heads above water but may struggle when an unplanned expense presents itself.

What do these unplanned expenses include?

When conducting this report, we looked at many variables. Essentially, unplanned expenses include hospital visits, unexpected utility bills, car repairs, and less-common occurrences such as natural disasters.

From the report, we learn that unplanned expenses cost the average American family living paycheck to paycheck nearly $2,000 a year.

Of those surveyed, auto repair bills were the main offender, accounting for 29% of unplanned expenses over the past 12 months.

Diving into the fees

Unplanned expenses are unavoidable, but that doesn’t mean financial companies should take advantage of those in need.

But, sadly, that is what happens, and it often comes in the form of “Junk fees” that look to take every nickel and dime possible.

Americans pay over $25 billion dollars a year in these fees to financial platforms, with certain options, like subprime credit cards, being worse than others.

The worst offenders

Subprime credit cards are by far the worst for borrowers regarding additional fees. Subprime credit cards are classified as credit cards intended for those with lower income and poor credit ratings.

Looking at the data, these credit cards account for an additional $11.5 billion in fees. That breaks down to an annual $770 per year for Americans living paycheck to paycheck. Fees include APR, subscription, late fees, fast payment processing fee, annual subscription, application fee, monthly maintenance, new cards fee, and ATM fees. 

Behind subprime credit cards, payday loans are the second most costly option, totaling approximately $6 billion in additional fees.

Fintech solutions, such as earned wage access and peer-to-peer lending, offer the best and cheapest solution, amounting to $1.3 in annual fees. 

How cash-poor Americans pay for expenses when credit isn’t an option

Credit cards make up a majority of the payment options selected, coming in at 40%, but Americans often look to other means to settle debts. This also debunk the notion that these consumers do not have access to credit. They do, they just also seem to understand how expensive the solution may be.

38% of those surveyed noted borrowing money from family and friends to pay for unexpected expenses. Others resorted to selling possessions (21%) or pawning items (16%)  to make payments.

Sadly, legal means aren’t always an option for some Americans in a bind. According to the report, 5% of those surveyed turned to crime to pay for unplanned expenses. 

Where do we go from here?

It’s clear that people living paycheck to paycheck are under immense pressure to meet the demands of a world that continues to cost more.

Middle-class Americans have options when unexpected expenses come up. Still, it is clear that many of these are predatory or, at the very least, do a poor job of explaining what the total costs incurred are. 

The full report is available to download on our website We will continue to unveil other unique findings over the next few months to raise awareness of the issue and lack of transparency around fees that empower Americans. As consumers become more aware of fees and the true total cost to borrow, they are more likely to take action and make more informed decisions. However, it’s up to congress and regulators to make finance fairer by adopting newer real-time payment systems that are not only cheaper, but more convenient and accessible.